Rocky Brands, parent company to brands like Rocky, Creative Recreation and Durango, had a rough quarter, with its Puerto Rico–based manufacturing facility getting hit during the busy hurricane season.
Despite the company’s successful second quarter, Rocky Brands accrued around $1 million in additional expenses related to payroll and overhead costs that could not be capitalized in inventory due to lower than usual product volumes at the company’s Puerto Rico manufacturing facility.
However, on a more positive note, Rocky Brands saw a net income of $2.2 million, or $0.30 per diluted share, compared to a net income of $0.4 million, or $0.06 per diluted share during the same period last year. Adjusted net income reached $2.8 million, or $0.39 per dilutes share, compared to an adjusted net income of $1.2 million, or $0.16 per diluted share during the same period last year.
“We are pleased to have achieved another quarter of strong earnings growth. Our ability to drive enhanced profitability despite softer top-line trends highlights our improved operating structure and focus on increasing margins,” said CEO and President Jason Brooks. “As we previously announced, approximately $1.7 million of military footwear shipments shifted from the third quarter to the fourth quarter due to the temporary shutdown of our Puerto Rico facility in the wake of Hurricane Maria.”
Meanwhile, net sales for the third quarter dropped 11.7% to $64.7 million, compared to $73.2 million last year. Wholesale sales for the period also fell 12.9% to $46 million, down compared to $52.9 million during the third quarter last year. Military sales were down compared to last quarter, $7.6 million, down compared to last year’s third quarter military segment sales of $10.1 million. Retail sales helped for the third quarter, increasing 7.8% to $11.1 million, compared to $10.3 million during the same time last year.
“Wholesale sales were below expectations as each of our brands posted modest shortfalls versus plan. We believe this was due to a combination of factors, including lower discounting as we’ve placed a greater emphasis on full-price selling and retailers buying closer to the holiday season compared with previous years,” said Brooks.
Gross margin was $19.5 million, or 30.2% of sales, marginally down compared to $19.8 million, or 27 percent of sales during the same period last year. Brooks looks to the expansion of Rocky Brands new direct channel as a resource to offset a number of the company’s challenges. Specifically, Brooks points to the Leigh Outfitters CustomFit program, a custom fit safety footwear program that offers a network of safety footwear for companies.
Brooks said that the company remains cautiously optimistic about growth prospects in the beginning of the net quarter as wholesale trends have picked up and military manufacturing resumes normal operations.