Rocky Brands Inc. reported a surge in earnings in the first quarter as sales rose 9.6 percent to $57.5 million.
The company reported first quarter net income of $1.5 million, or 20 cents per diluted share compared to a net loss of $0.2 million, or 3 cents, in the first quarter of 2016.
Mike Brooks, chairman and chief executive officer, commented, “Our first quarter results represent a solid start to 2017. We achieved approximately 10 percent top-line growth by more than doubling our military segment sales to a quarterly record $12 million. Importantly, we were able to fulfill this significant increase in military footwear demand at margins well above the last half of 2016 due to improved efficiencies at our company-operated production facility in Puerto Rico. At the same time, sales trends in our wholesale segment have stabilized, particularly in Work and Western, our two largest categories. On top of this, wholesale gross margins improved meaningfully year-over-year driven by a higher mix of full priced selling. The actions we have taken over the past six months to better position the company for profitable growth are clearly gaining traction. While there is still work ahead of us in order to maximize shareholder value over the long-term, we are confident we are heading in the right direction.”
First Quarter Review
Net sales for the first quarter increased 9.6 percent to $63.1 million compared to $57.5 million a year ago. Wholesale sales for the first quarter were $39.2 million compared to $40.2 million for the same period in 2016. Retail sales for the first quarter were $11.9 million compared to $11.5 million for the same period last year. Military segment sales for the first quarter increased 107 percent to $12.0 million compared to $5.8 million in the first quarter of 2016.
Gross margin in the first quarter of 2017 increased to $19.7 million, or 31.3 percent of sales, compared to $18.9 million, or 32.9 percent of sales, for the same period last year. The 160 basis point decrease was driven by the increase in military segment sales which carry lower gross margins than our wholesale and retail segments.
Selling, general and administrative (SG&A) expenses decreased to $17.4 million, or 27.6 percent of net sales, for the first quarter of 2017 compared to $19.1 million, or 33.3 percent of net sales, a year ago. The $1.7 million decrease in SG&A expenses was primarily related to lower compensation expense following the workforce reductions in the second half of 2016.
Income from operations was $2.4 million, or 3.8 percent of net sales compared to a loss from operations of $0.2 million a year ago.
Interest expense was $90,000 for the first quarter of 2017, versus $136,000 for the same period last year.
The company’s funded debt decreased $16.4 million, or 75.8 percent to $5.2 million at March 31, 2017 versus $21.6 million at March 31, 2016.
Inventory at March 31, 2017 decreased 18.6 percent to $68.8 million compared to $84.5 million on the same date a year ago.
Rocky Brands makes footwear under brand names including Rocky, Georgia Boot, Durango, Lehigh, Creative Recreation, and the licensed brand Michelin.