Rocky Brands (RCKY) Q2 Earnings call transcript Jul 30, 2024
2min read In a recent earnings call, Rocky Brands showcased resilience and adaptability, reporting a modest second-quarter performance that exceeded expectations. The company, known for its diverse portfolio of brands including Durango, XTRATUF, Georgia, Rocky Work, and Muck, navigated an uncertain macroeconomic environment, with Durango and XTRATUF leading the charge with double-digit year-over-year gains.
Strategic Financing and Operational Improvements Drive Earnings Growth
Rocky Brands' financial profile has been strengthened by strategic moves such as debt refinancing and the simplification of its capital structure. The company's focus on improving its financial health has resulted in higher gross margins and lower operating expenses, both of which contributed to increased earnings. The refinancing deal with Bank of America is projected to generate approximately $4.4 million in annualized interest expense savings from 2025 onwards.
Brand and Channel Performance Highlights
The second quarter was marked by strong performances from key brands like Durango and XTRATUF, which have shown significant momentum and outperformance. Durango's success can be attributed to its strong demand across key accounts and Farm & Ranch partners, while XTRATUF's rapid expansion is driven by its legacy outdoor products and new collaborations. Muck had a good start to the quarter, but was impacted by unfavorable spring weather patterns, leading to slower retail terms. However, the brand is optimistic about a rebound heading into the fall season. Georgia and Rocky Work faced challenges in the second quarter, with Georgia experiencing over-inventory pressure from smaller accounts. Despite this, the team was able to offset this pressure with mid-single-digit increases from key accounts. Rocky Work, on the other hand, saw a notable uptick in momentum towards the end of the quarter, fueled by new product introductions and expanded distribution.
Supply Chain Challenges and Outlook
The call touched upon the challenges faced by the company in terms of supply chain delays and rising ocean freight rates. The management expressed cautious optimism about the remainder of the year, anticipating third-quarter gross margins to decrease sequentially from Q2 gross margins, before rebounding in the fourth quarter. The company is closely monitoring the situation and remains committed to mitigating the impact of these challenges on its operations.
Market Outlook and Future Prospects
Looking ahead, Rocky Brands is targeting a mid-single-digit growth rate in Wholesale and Retail segments for the back half of the year, with a focus on e-commerce sales and key account growth. Despite facing challenges in certain areas, the company is optimistic about its future prospects and is committed to driving continued success and growth.
In conclusion, Rocky Brands' second-quarter earnings call highlighted the company's ability to navigate challenging macroeconomic conditions and deliver modest growth, driven by the strong performance of its key brands and strategic financial moves. The company is focused on mitigating supply chain challenges and is optimistic about its future growth prospects. Investors and stakeholders will be closely monitoring Rocky Brands' performance in the second half of the year and beyond, as it continues to navigate the complexities of the retail and manufacturing landscape.