After a strong first nine months in 2018, Rocky Brands is still reaping the benefits of implementing several cost-cutting measures and updating its manufacturing capabilities in 2017. The company's retail sales recorded a double-digit growth during the fourth quarter, while the wholesale business posted a solid gain. The gross margin also improved.
The management said these results demonstrates the progress that the company made enhancing its gross margins through segment mix, increased manufacturing efficiencies and improved full priced selling, combined with tightly managing operating expenses.
Revenues for the fourth quarter inched up by 0.3 percent to $67.2 million, weighed down by military segment sales, which dropped to $4.8 million, compared with $8.2 million for the fourth quarter of 2017.
However, wholesale revenues improved by 3.4 percent to $44.4 million, driven primarily by robust demand for the hunting and commercial military categories. Retail sales jumped by 14.6 percent to $16.5 million, as the Lehigh CustomFit program continues to gain traction with existing and new accounts.
Overall, the gross margin rose by 1.1 percentage points to 35.9 percent, driven by a lower percentage of military sales, which carry lower gross margins than wholesale and retail sales, and higher military segment margins versus the same period last year.
Net income declined by 17.9 percent from the year-ago quarter to $3.6 million. However, the fourth quarter of 2017 included a one-time income tax benefit of $3.2 million due to the enactment of the Tax Cuts and Jobs Act and an after-tax charge of $1.6 million associated with the loss on the sale of the Creative Recreation brand. Excluding these items, adjusted net income was $2.8 million in the fourth quarter of 2017.
For the full year, sales declined by 0.2 percent from the previous year to $252.7 million, as military segment sales dropped by 30.0 percent to $26.4 million.
Wholesale revenues increased by 3.9 percent to $173.1 million, or by 7 percent excluding the Creative Recreation brand, which was sold in late 2017. By brand, Georgia Boot was up by mid-single digits in 2018, fueled by new product introductions and investments in marketing. In terms of product, there were several standouts, such as the Carbo-Tec Work Western and the new Logger collection of boots for the farm and ranch channel.
Retail sales jumped by 10.1 percent to $53.2 million, fueled by strong gains in B2B business and the direct-to-consumer channel. The management said the branded e-commerce websites have benefited from recent investments to increase traffic and conversion and enhance the consumer experience, with rich content produced by each brand including videos, images and banners.
Rocky Brands' gross margin rose by 2.5 percentage points to 34.4 percent, while net income soared by 51.8 percent to $14.6 million.