The American footwear company Rocky Brands is “pretty confident” to increase sales by 20 percent this year after the top line rose by 57.3 percent to $87.7 million in the first quarter.
During the Baird 2021 Global Consumer, Technology & Services conference, the company’s CEO Jason Brooks said that the second quarter started “pretty well” but expects sales growth to slow down in the second part of the year, partially due to a tougher comparison basis.
Regarding the purchase of Honeywell International’s performance and lifestyle footwear business in March for $230 million, Brooks candidly admitted that the transaction was “non the optimal size” considering that it was his management team’s first acquistion. But, he added that the brands bought “are phenomenal.”
The acquired portfolio comprises The Original Muck Boot Company, Xtratuf, Servus, NEOS and Ranger brands.
Brooks said that “Muck is one of the strongest, if not the strongest, brands in the neoprene rubber boot business,” while Xtratuf has been “on fire the last couple of years.”
He noted that Honeywell’s brands, which center on neoprene rubber and PVC-injected products, are complementary to Rocky Brands’ portfolio, which focuses more on Cordura and leather items. He stressed that the brands are not cannibalizing each other and the company is just adding to its product line.
He also sees the opportunity to “really optimize on the operational side” as selling footwear was not the core business of Honeywell, a conglomerate that specializes in aerospace, building technologies, performance materials and technologies, and safety and productivity solutions.
Brooks said that the company is on track to integrate the newly acquired business even though there have been “some bumps” along the way but “nothing scary.” The main issue was to find a new distribution center to handle the increased trading volumes.
Honeywell’s brands expand Rocky Brands presence “a little bit more” in the fishing market, while the company will contribute to the development of the acquired brands in the rugged outdoor market as well on online market places such as Amazon thanks to its distribution center capacity.
Rocky Brands’ chief financial officer, Tom Robertson, who also attended the conference, said that the company has increased its long-term underlying sales guidance to a mid to high-single digit rate, compared with a previous estimate of a low to mid-single digit rate.
Robertson added that the company is still targeting a gross margin of 40 percent in 2021 despite an increase in raw materials. He declined to give a forecast regarding the operating margin as the company is still gauging the magnitude of the synergies stemming from the acquisition of the Honeywell brands. But he estimates that the company can increase its operating margin this year and beyond. He noted that selling the acquired brands directly to end users via online marketplaces will enable to lift margins.
Rocky Brands also announced that Brooks has been appointed as chairman of the board of directors following the decision of his father Mike Brooks to step down. Mike Brooks will continue to be a member of the board.
Jason Brooks has served as president and CEO of the company since May 2017, while Mike Brooks was chairman since 2005. He also served as CEO from January 2005 until July 2011, and from September 2016 until May 2017. Prior to that, he was president and CEO of the company from August 1991 to January 2005.
Rocky Brands also appointed G. Courtney Haning as the board’s lead independent director. Haning has been a board member since 2000.
Rocky Brands was founded by the brothers William and Mike Brooks in 1932. It is controlled by the family, which bought back the company from the Irving Drew Shoe Company in 1975 after the founder William Brooks sold it in the late 1950s.
