Rocky Brands (RCKY) 30 Apr 242024 Q1 Earnings call transcript

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Rocky Brands' First Quarter 2024 Earnings Conference Call. [Operator Instructions]I would like to remind everyone that this conference call is being recorded and we'll now turn the conference over to Brendon Frey of ICR. Please go ahead, sir.

Thank you, and thanks to everyone joining us today.Before we begin, please note that today's session, including the Q&A period may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. differ on subject assumptions uncertainties to cause results based time, at which are actual are and changes, to statements information available and this may Such materially. risks and update We assume statements. such no to obligation

Brooks, For over the refer and today's Executive please and XX, Chief to year Exchange and now discussion to Commission a the filed XX-K press XXXX.I'll with ended Rocky for of the complete of reports risks Brands. uncertainties, the our Jason Securities release conference including turn Officer our December Jason?

sales today's Brendon.With me our of ahead is you, be Chief quarter questions.We Thank and our expectations. we with our as Operating remarks, Chief on happy earnings After call Officer. came pleased Tom any take first are Financial in Robertson, to will and our prepared results

meaningful sell-through our to now rightsized more I'll XXXX. increase our bringing the be with have sales of few implementation fueled the about performance outlook continue a a reinvested advertising the quarter the and of reorders Following channel, throughout brands.While XXXX initiatives majority several double than that into saving and are value wholesale inventories by shareholder macroeconomic positioned we XTRATUF the stronger the spend brand. gains aligned we anticipated leverage. programs, of to profitability our we across last into start uncertain, the through for have year, cautiously enhanced as and more their detail sell-in the stability greater expense But numbers, optimistic top-line additional In highlighted Tom to digit to business business which I'll category is our savings go minutes momentarily. portion and generate our cost we experienced by our momentum well the encouraged performance Durango cadence are retailers remains closely first of drivers and unfolds.Before by going growth covers

categories normalcy return outdoor on western we benefited to to industry. While inventory levels, the this pleased Work, to are to partner based across different start has and the degrees, this see

category demand brands digit faster Work the driven spots are product had year's and Rocky increase Georgia, sell-through. launches. Boot single a in legacy strong styles price and bright XTRATUF by Muck certain in Our our under styles the delivered which with sales the quarter.Georgia includes several new for decreases and our consumers, quarter Last several on to leading resonating selective Georgia product select

is in, retail through sell Georgia now online strong improve both to gains partners. Importantly, to leading with and translating sell key accounts better

digit beyond improves, backdrop key last with several In partners was this we the we growth saw retail has accelerate. strong Georgia expect our with what double growth of quarter to large year.As the established trajectory strong fact, accounts. advanced And online growth industry

the work early and retail in is year some at the in Work certain take bestsellers. business selling receipt While the product, pressure through now key to a of position brand's under partners retail Rocky slower remained as is improving better

boot market. XXXX.Shifting through that and both Work as new to line our our margin and to we of This shipped QX, own a contributions Dominican Work Rubber line Boot we During brings the provide new in a both facility business. Rocky product Work move made value quality should boots top-line competitive also

launch where support our redesigned with better was the anniversary. quarter a levels, homepage we of acceleration Ranch this the in partner the milestone first stockouts. styles bookings first conjunction Muck inventory & demand key western of led along by XXth first a marketing of to accounts To across enhanced for The an with an highlighted brand's quarter early by brief category. Durango event, progressed.Turning starting as to celebration introduced consumer Farm in some delivered Muck's helped the in amplifying remains strong and partners U.S. demand key quarter partnerships business. accelerate the and heritage and brand the solid, especially legacy up Interest that our than recent good the highlighting at-once mid single campaign efforts very were to sales Muck marketing digits product are expected influencer moderate as Durango lifted With visibility.

moved product and we and early first quarter to promotional we we've improving upon Rocky even the Durango focus lead distribution better on retailers. positioned orders duplicate able product. product setting Western, focus coupled Durango more with time, on Sales same driven on the in were and key late were in first SKU Rocky an overstock addition key wholesale to quarter its of digits, the However, year. later was results.For better fulfill going build climate and count up its the returns XXXX and with in the western new strong for channels demand up price which with have demographic At inventory primarily quarter of the to improving styles double XXXX should our of for targeted This and discounting reduced late in ship additional eliminated line by forward. inventory full quickly Western to low business sell in health in higher

on Demand category with solid continued to healthy offsetting for with orders and customers wholesale rebalance e-commerce turns growth double-digit bookings both wholesale XTRATUF legacy inventories our year, spring some XTRATUF, higher-than-expected chasing delivered item than accelerated, our with a Outdoor at-once in modest at last declines and Rocky very styles key from in Our for a us and new helping products. build outdoor performance strong more inventory growth Muck. channel.After direct styles leaving

country aggressively and sufficient filling for and Muck source to respect a Rocky securing on to the XTRATUF.With we inventory insulated by sales, new footwear. we're pressured mild that winter while throughout ahead, and Looking are replenishment bookings sales of in efforts maintaining limited focused rubber

our and showed categories the and gardening and walking Ridgetop While styles for results. these outdoor challenged, very boots Outback Rocky shoes and remain like Muck casual dog hikers have positive

to the sales up commercial in meaningful customer in hunting, products quarter category and supplies first we last shipment Army of team the forward, completed elevated strong this channel other its purchase that e-commerce Georgia, a U.S. agreement sites double believe sales.Lastly, total sales as footwear branded for the an to XXXX. QX retail. quarter wholesale, are improve to traffic Going Rocky, help posted with value-driven XTRATUF our and we were up sales with and digits Each military increases non under Durango, the of will introducing Muck gear.Shifting to in that compared new

CustomFit onboarded We we at in also up margin our the quarter way compared quarter, the websites which opened discount At increased over reoccurring through was last move Lehigh quarter. time, business employee progress inventory as same traditional in a some utilized was continued overstock our companies as first the wholesaler we BXB renewals new account year's start refreshed channel.Lastly, their and new to the year, higher several XXXX. budgets, improvement the to for to eligibility accounts the paving had subsidies and

favorable the the team over out, as Rocky impact sales out to future rollout setup, The subsequent it continuation XXXX. This in of line results I our expansion, some that sell-through ahead.I'll and on resilient provide programs levels discontinuation to focus top the the with the thank start call realigned to promising allowing to the sheet they demand wholesale the organization to sales addition expense continued turn disrupted brand Tom we return call CustomFit the our consumer recently I In we've of coupled of in pipeline that gains want Tom, to is to and business cover moderation our partner industry account our offset better seen in year will the for to we were that dynamic, and portfolio translate should and expect entire improving improvement quarters.Before results. line and inventory greater want cruise these demand foundation improve into strong in across a implementation.While balance point positively Tom? turn strong financial now rolled QX, I details. for the discipline provide financial over changes sales a

XXXX about navigate allowed we X.X% our Thanks, to and adeptly sales of us are current the steady optimistic our for consumer product has quarter $XXX.X diversity the million. brands Reported discussed, the net environment. first increased start for to of the as Jason retail demand Jason.As year-over-year categories

increased sales the excluding the and service brand to X.X% factor the made X% the model or change distribution model to from were were Canadian million period, wholesale $XX.X the change manufacturing to ago Canadian up distribution net net the in sales Retail X.X% sales also change. in we X.X% Canadian you sales segment, when million.Turning gross $X.X sales contract $XX.X Excluding service And increased brand By factoring in year distribution model XXXX. after profit. late million.

XX by at manufacturing year. our million service basis wholesale, and rest were sales segment of than from XX margins Gross or down up profit was $XX.X basis gross divestiture gross first product the or $X.X margins the of portfolio.Reported as quarter, to the XX.X% recovery. points margin X.X%. points same driven to retail period in the the net last brand, gross Minus first were sales the which XXXX compared up million of year-over-year, follows: gross carried in recovery, $XX.X XX.X% XX.X% For tariff of from the margin benefited by a quarter of XX.X%, million flat lower to contract XX.X%

On compared $XX.X this sales or an in in net recovery, XXX adjusted expenses to net basis, $XX.X net expenses million The ago. net million to of million sales last efficiencies of adjusted year. of operating attributable were largely income year.Income lower operational or XX.X% and quarter or Operating Adjusted year initiatives or XX.X% to income tariff freight net decrease million million or $X.X million or as XX% year of ago. X.X% the strategic of X.X% net were up sales the were in compared sales compared year operating in $XX.X was year implemented expenses cost expense sales well of Excluding sales of a basis points. XX.X% wholesale X.X% savings, a $X.X was XXXX the operating the or of was operations of $XX.X XXXX margins and of sales restructuring period. with X.X% current reviews achieved $X.X million ago net as from net sales $X or operating in through million first

of with quarter quarter was The decrease the the reflects compared debt in XXXX.On period. in compared first diluted total million to of ago.Turning $X in year or our $X.XX our per net year quarter XXXX. decrease and to first per adjusted the quarter loss cash of or this income debt the of or the expense reported since was of XXXX net quarter, $X.XX the compared of first $XXX For ago we per debt, compared first loss $X.XX sheet. equivalents diluted income first share basis, stood $X.XX the year, at million, March million balance million, of net $X.X million $X.X with interest end GAAP share of a cash levels of totaled the share diluted net million year. $X.X diluted last a costs lower of and for Adjusted million XX% $X.X unamortized $X.X with $X.X or issuance net XX a a per At quarter million share

first expected yesterday, existing facility the secured revolving a credit $XXX We interest TCW existing of associated extended approximately with $XX As proceeds approximately new with facility and portion end senior facility. revenue improvements outlook, We savings XX.X% we for ago are transactions the Bank Asset of by additional our offset $X.X facility of of we expect The Inventories to upsized, in well still in in expect range investments down by generate XXXX, Management.We remainder these generate and the savings from term million. signed refinancing partially expect and margin transactions, compensation.Finally, comprised as our as at Starting and marketing utilized compared high of the adjusted to of facility, see amended to senior million the we the were to to amortization delivered which million million.That concludes questions. remarks.Operator, million $XXX prepared towards of XXXX fees America. million brands million to combined our $XXX slight our of million retire now $XXX deleverage at respect credit now adjusted secured be retirement loan project combined $X.X transactions refinancing savings million these based first XX.X% million, of $XXX.X down million gross of interest the down to performance-based expense a a our SG&A a performance, revolving quarter the of term remain the due facility offset facility be margins we our to ABL XXXX are the $X.X now over the of $X.X approximately from is and to annualized our we end consistent an ready quarter prior million. of end XXXX, from and on million. $X.X to $XXX.X $XXX.X amends announced of compared versus in approximately $X from guidance we or with XXXX, restates year loan term the XXXX.With will a the X.X% to million

is [Operator Instructions] Our Baird. from first Komp question Jonathan of

first Tom, could just up I question, on commentary. guidance follow if the

would higher in for growth be, year growth. If year the $XXX and the up look the of underlying rate $XXX think, you the press I release, indicated at last X% end highlighted, you is which underlying X% to the excluding guidance million non-comparable you think, I now million, revenue the

you quarter in as the look you're into underlying the or terms unsustainable color of was year? what there's if the ahead, moderated something of growth that for in the outlook first any building pace So

as under had at where which couple we there in our probably them. is forecasted think were I why internally a slightly closeout came margins opportunities a took look of that of perspective, from QX, advantage we we

think If incremental. sales of And to opportunities arise those certainly of continue were some we'll in the so I those. those take future, advantage

convert to. rest good And overall don't for and our we higher I being into feel year, we sense future about that cash. but that necessarily of the it it But the So we'll bake think model. about guided range end just here what the a cautious just there's we the of inventory holds of of kind to

election Yes. just add, year. election year, I that odd be the to seem would Jon, an with years always

as think why. I one So the reason and depending up on goes being year where just through, cautious that that we're ends kind other of was

we Jon, product. at in Yes. is end out that the his jumped were a military our Jason called mind, One that contract my for too, of thing other in that remarks commercial

we opportunity, see on X those. we'll win if that or try that But another have in won't them planned don't there's we we quarters. next so to And certainly that's the something and see bid

of or talk the would I performance. on across can how if relates there And way quarter up categories, first any those and brands sort segments there's sell-in characterize versus across? dynamics differences performance you to a the underlying demand? indications consumer versus in about in really think Any catch sell-through seeing Is maybe Maybe changes going wholesale follow or as we up you're sort should the of to forward? it sell-through how the that the but

Yes, that's a Jon. great question,

we brand, -- And retail about and continue have XTRATUF I in really earnings last we call; the sell-through. think that think gather that talked in about from We of it's to we brand partners evaluate, we their great the the I data our some we're Durango on seeing something sell-through. particular, right? this

touch is more and Muck might probably a even a Durango the to touches to then a now.And It then Work sell-in hot area, that bit, category but just seems And as it's right? phenomenon The be Georgia western the being So little the right as the brand retailer Rocky. well. is positive. one little

good. at So not from is retail sell-through a Work standpoint, as

And not so able year up think And we're hopefully hopefully, as to sell-in really and But the the I that and question. bad was then category. -- think your quite patterns there. worst a why that I covers And we'll hunting pick category weathering just be come seeing is stronger that's this took see the the outdoor and some weather some answers hot.

Yes.

with meaningful I call have out the there key that we of I kind board a increase accounts. across that only was is saw other that the think

in. very that Jason earlier, And to performed as well started to cadence. accounts normal us and buy of alluded more key back for So

QX starting the normalized is of we're see which year. so the more good And behavior, to for hopefully and rest

split And business how remind me, of account is versus have accounts? you can you non-key oriented rough a given your much key

for shared to We have now. ourselves not and one that keep before, we'll that, Jon probably

Tom, it yet. questions. revenue, be think point, cycling the low X we a any amount Last should fair business modeling you're of I color, just and QX non-comparable to expect

to know then the still quarter. for pretty in I So can the pretty any big, meaningful talking first you're SG&A, there after year leverage achieving And you offer? color deleverage

quarterly So how spend? SG&A on progression should we think about the the

Yes.

a the the and yes, line being and have from fourth quarter, our point accelerating then So top perspective, third our low QX for we obviously are typically in year quarters. which strongest

We have given what is the fourth for XXXX. quarter our quarter we've in largest the seen e-commerce space

from of low I the spend relates, kind As see in point that SG&A think second a as SG&A spend quarter well. an you'll

of that lot lot You'll about.A investments talked digital see a those being of that spend. we've

QX hit and our well. when season QX peak we You'll in in see that as

we talked SG&A that income to the thing increased trying slightly I we're think One in is, slight -- is to protecting call XXXX. with make prior I protect a spend sure got we the deleverage across a to operating about year. we're wanted on just our comparability

And with that how and pull discretionary spend that help rest so we see we year, plan, protect we've like our sales XXXX. and happens of adjust flex year, as we'll we on muscle the last did to income to throughout operating back learned can what for the

is next BTIG. of The Janine question Stichter from

for A couple me.

upside or how impacts this the it it and First more some -- on about like upside understand the talk on I there? you seemed bit cost most was is From just savings of redirected or the channels is versus took that? to that about higher both advertising wholesale a the benefit the of of little something the retail you side Can if spend. of into where the like our that sounds business. some think standpoint, want side the just to

Yes.

We to more wholesale staying our for consumers the about aware are new front introducing Tom them us, and really just in own consumers. that our that of It will little of like start. to bit and we're a make brands, where that are continue aware of drive play. is to the And of have to continuing add sure the the drive it's products business support our websites, want probably I'll obviously, partners So to and better retail our brands on. feel But also we make we a margin. drive to brand. we

in from for back little go standpoint we retail really the So investing but it has really important.And stayed wholesale. did mainly a focuses We them bit the budget about a from dot-coms, same. on Lehigh the that not is

then and in you it XTRATUF Durango. like sounds were chasing And

to you're You into But those spilled of over that, orders. and having bigger that with any partners wholesale encouraging about your at-once were seeing stocks is dynamic or some at-once to that out fulfill I chase? there And how subprime of how earlier place able guess, picture, orders? orders is that of just to that then think of fact Is to the QX? for

Yes, can add Jason I'll this take in. and one certainly

maybe a team was quarter. I the the and slight think end of spillover, getting the into not turned for getting the but it QX. towards around that there Particularly of all proud here much inventory

of inventory very we of that. the team proud saw in turn So phenomenal I'm for March. a that

think we're is seeing pedal. what I the we're stepping on gas

Our particularly you're it. yes, is they in-transit are telling account up, dead that the chasing.And it styles right, every to if we book inventory we're on want

to supply over more or these factories from production you a the think in Asia years if months, them ago the levels what's is back happened over think with XX the I years last everything year X bit pulling time. inventory, up, restaffed chain particularly few getting getting on little taking back about last with

tour for to the people core for product, of book we're So we're as as to before busy fall the trying that Durango and XTRATUF they our season. -- the particularly the and Muck, aggressively can get to trying boot styles

would the for And no questions have further back Brooks the turn Jason remarks. to queue. we gentlemen, and closing some in Ladies call like to I

Great. Thank you very much.

reiterate again Tom appreciation and to team. want to Rocky the Is Just

we've the strong and thank look we X We the forward commitment and so we are much. finishing first our thank excited and their of and about you how investors for to QX and months year, XXXX all executed in

conference. very you Thank then and today's gentlemen, that Ladies concludes much, sir.

lines your for time. disconnect your this at Thank you may participation. You