Rocky Brands reported sales of $73.2 million for the third quarter, which represent a 4.6 percent increase versus the comparable period last year. The company said that inventory levels, which had grown due to last year's warm winter, began to normalize in the third quarter, with orders finally picking up.
Net income fell by 75.3 percent to $445,629 as compared to $1.8 million a year ago, in part due to restructuring charges. Excluding these charges, income from operations dropped by 31 percent to $2 million.
Wholesale sales declined by 3.2 percent to $52.9 million. Among categories in the wholesale segment, work grew in the low single digits, driven by an acceleration at Georgia Boot. Western, led by Durango, was up slightly versus a year ago, while hunting was down double digits as the category is still slowly rebounding after the warm winter. Retail sales were flat at $10.3 million. Sales for the military segment nearly doubled to $10.1 million as compared to $5.1 million in the third quarter of 2015.
The results for the quarter included a one-time pre-tax charge of $1.2 million related to reorganization activities. The charges covered layoffs at the company's corporate office, a reorganization of its sales force and measures to improve manufacturing efficiencies, which are expected to lead to major annualized expense savings. Results were also impacted by a 4.6 percent drop in gross margin, mostly due to the ramp-up in production capabilities to meet the increased military footwear demand. Margins were also impacted by the larger proportion of sales in the military segment, which carry lower initial gross margins than the retail and wholesale segments.
Alongside its reorganization efforts, Rocky Brands said the company is continuing to extend its reach into less weather-dependent casual footwear. These efforts have included the development of its 4EurSole line as well as the acquisition of Creative Recreation, an upscale sneaker brand, in 2013. At Creative Recreation, sales were down in the third quarter on an annualized basis and below expectations, as retailers are still reluctant to take on additional inventory until the current environment for footwear and apparel shows some improvement, the company said. Prices for Creative Recreation are being lowered in an effort to attract a larger audience.