Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rocky Brands Inc (RCKY, Financial) exceeded expectations for the second quarter, driven by strong performance from Durango and Extra Tuff brands.
- The company achieved higher gross margins and lower operating expenses, contributing to improved earnings.
- Refinancing of debt and simplification of capital structure are projected to generate $4.4 million in annualized interest expense savings starting in 2025.
- Positive double-digit revenue gains were observed in the company's branded e-commerce sites, particularly for Extra Tuff, Durango, Georgia, and Rocky.
- The company reported a decrease in total debt by 12% since December 31st and 31.3% since June 30th of last year, indicating improved financial health.
Negative Points
- Net sales for the second quarter were down 1.6% compared to the same period last year.
- The work category, including the Georgia and Rocky Work brands, faced pressure due to over-inventory and conservative purchasing by smaller accounts.
- The unfavorable spring weather patterns led to slower retail turns for the Muck brand, impacting restocks late in the quarter.
- Rising ocean freight rates are expected to negatively impact gross margins for the remainder of the year.
- The commercial military duty segment experienced a decline, partly due to the delay in the military budget release for 2024.
Q & A Highlights
Q: Can you comment on the current state of the supply chain environment and your ability to chase inventory for Durango and Extra Tuff? Also, what are you seeing with ocean freight rates?
A: We are experiencing some delays in the supply chain but have a lot of inventory coming in to prepare for Q3 and Q4. Ocean freight rates increased in June but softened in July. We are cautious with our margin guidance due to these fluctuations. (Thomas Robertson, CFO)
Q: Can you elaborate on the pressure you're seeing in the work brands, particularly with smaller accounts?
A: Smaller accounts are being more conservative with their inventory, unlike key accounts which are performing better. We believe this cautiousness may be influenced by the upcoming election year. (Jason Brooks, CEO)
Q: What type of underlying wholesale growth are you expecting for the back half of the year?
A: We are targeting mid-single-digit growth in wholesale, driven by key account growth. We expect to reach the high end of our sales range of $450 to $460 million. (Thomas Robertson, CFO)
Q: What is your sense of the health of the Western category and the end market rate of sell-through?
A: The Western category is seeing some growth, partly due to the popularity of country music. We are seeing good sell-through with our retail customers and expect this trend to continue. (Jason Brooks, CEO)
Q: Can you quantify the increase in freight costs and its impact on gross margins? Also, is there any ability to pull back on SG&A expenses?
A: Container prices nearly doubled in June but softened in July. This could impact our margins by a couple of hundred basis points. We are managing operating expenses to maintain our operating margin goals. (Thomas Robertson, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
