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01/10 16:03
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with a 34% increase in EPS and a 7% sales growth. Despite challenges like tariffs and sourcing delays, the company shows resilience with strategic sourcing shifts and strong brand momentum, particularly for XTRATUF. While Q4 margins may suffer, optimistic guidance and strategic adjustments suggest a positive outlook. The market's reaction is likely positive, considering the overall strong financial metrics and future growth potential, despite some caution due to geopolitical risks.
Sales Sales for the quarter increased 7%.
Gross Margins Gross margins were up 210 basis points.
Adjusted Diluted EPS Adjusted diluted EPS was $1.03, a 34% increase versus Q3 last year.
Net Sales Reported net sales increased 7% to $122.5 million.
Wholesale Net Sales Wholesale net sales increased 6.1% to $89.1 million.
Retail Net Sales Retail net sales increased 10.3% to $29.5 million.
Contract Manufacturing Net Sales Contract manufacturing net sales increased 4.1% to $3.9 million.
Gross Profit Gross profit was $49.3 million or 40.2% of net sales compared to $43.6 million or 38.1% of net sales in the same period last year.
Operating Expenses Operating expenses were $37.6 million or 30.6% of net sales compared to $33.6 million or 29.3% of net sales last year.
Income from Operations Income from operations increased 16.5% to $11.7 million or 9.6% of net sales compared to 10.1% of sales last year.
Interest Expense Interest expense was $2.6 million compared with $3.3 million last year.
Net Income Net income was $7.2 million or $0.96 per diluted share compared to net income of $5.3 million or $0.70 per diluted share in the third quarter of 2024.
Adjusted Net Income Adjusted net income was $7.8 million or $1.03 per diluted share compared with $5.8 million or $0.77 per diluted share a year ago.
Cash and Cash Equivalents Cash and cash equivalents were $3.3 million.
Total Debt Total debt net of unamortized debt issuance costs totaled $139 million, a decrease of 7.5% since September 30 of last year.
Inventories Inventories at the end of the third quarter were $193.6 million, up $21.8 million or 12.7% compared to $171.8 million a year ago.
XTRATUF: Strong growth with double-digit increases in U.S. wholesale and online sales. Legacy 6-inch ankle deck boot, especially the duck camo version, was the top performer. Launch of cold weather collection, Sesame Street collaboration, and exclusive online products planned for Q4.
Muck: Double-digit growth in U.S. wholesale business driven by improved inventory and new collaborations like Bone Collector. Strong performance in women's Muckster II Chicken Print series and men's products. Growth in hardware stores and Farm and Ranch segment.
Durango: Sales down year-over-year in Q3 due to order pull-forwards in Q2. Consistent growth in Farm and Ranch accounts. Highlights include Shyloh series and on-trend women's fashion collection.
Georgia Boot: Double-digit growth with major accounts and field business. Success driven by new product launches like Carbon Flex Wedge and legacy bestsellers.
Rocky Work, Outdoor, and Western: Growth in work and outdoor categories due to new distribution programs and product launches like Wildcat series and BearClaw outdoor boots. Decline in Western sales but gains in Work Western products like Iron Skull Safety Toe Western pull-on.
Rocky Commercial Military and Duty: Improved results with gains in commercial military sales and Fire Boot program. Strong performance with U.S. Postal Service customer.
Geographic Sourcing Diversification: Shifted production to facilities in the Dominican Republic and Puerto Rico. Added new manufacturing partners in Vietnam, Cambodia, and India to reduce reliance on China.
New Distribution Programs: Expanded distribution in Farm and Ranch retailers and sporting goods stores across the U.S.
Supply Chain Adjustments: Diversified sourcing base to mitigate higher tariffs. Increased in-house production to 50% by 2026, up from 30% in 2025.
Gross Margin Improvement: Gross margins improved by 210 basis points to 40.2% due to price increases and higher retail sales.
Tariff Mitigation Strategy: Implemented price increases and diversified sourcing to offset higher tariffs. Anticipate tariff-related headwinds to abate by mid-2026.
Marketing Investments: Increased marketing spend to support growth, especially during the holiday season.
Higher Tariffs: The company is facing higher tariffs imposed by the U.S. on most trade partners, which are expected to significantly impact gross margins in the fourth quarter of 2025 and into 2026. Approximately $10 million in incremental tariffs will flow through the P&L in Q4 2025, with the remainder hitting in the first half of 2026.
Supply Chain Adjustments: The company is still ramping up production with new manufacturing partners outside of China and Vietnam, which has resulted in delayed shipments. This could impact the ability to meet demand in the short term.
Consumer Environment: The broader consumer environment remains uncertain and choppy, which could impact sales and operational performance.
Increased Operating Expenses: Operating expenses have risen due to higher outbound logistics costs, increased selling costs associated with direct-to-consumer business, and higher marketing investments. This could pressure profitability.
Inventory Management: Inventories have increased by 12.7% year-over-year, with a significant portion attributable to higher tariffs. This could lead to cash flow challenges if inventory levels are not managed effectively.
Geopolitical and Trade Risks: Uncertainty around trade negotiations and geopolitical risks could further impact sourcing and production costs, as well as the ability to mitigate tariff impacts.
Revenue Growth: The company expects revenue to increase between 4% to 5% in 2025 compared to 2024 levels.
Gross Margins: Full-year gross margins are projected to decrease approximately 70 basis points to between 38% and 39% in 2025. However, gross margins are expected to return to the high-30s to low-40s percent range in the second half of 2026 as the company moves through the incremental tariffs currently on the balance sheet.
Earnings Per Share (EPS): 2025 EPS is expected to increase approximately 10% over last year's $2.54.
Tariff Impact and Mitigation: The company anticipates that the headwinds from higher tariffs implemented this year will abate midway through 2026. Actions to mitigate these impacts include shifting more production to in-house facilities and diversifying third-party manufacturing to reduce exposure in China.
Supply Chain Adjustments: By 2026, the company projects that 50% of inventory needs will be manufactured in-house, up from 30% in 2025. Approximately 20% of production will occur in China, with only 10% imported into the U.S., and the remaining 30% will be split between Vietnam, Cambodia, the Dominican Republic, and India.
Brand Momentum: The company is optimistic about brand momentum, particularly for XTRATUF, with strong growth expected in the fourth quarter driven by new product launches, collaborations, and exclusives.
The selected topic was not discussed during the call.
The earnings call reveals strong financial performance with a 34% increase in EPS and a 7% sales growth. Despite challenges like tariffs and sourcing delays, the company shows resilience with strategic sourcing shifts and strong brand momentum, particularly for XTRATUF. While Q4 margins may suffer, optimistic guidance and strategic adjustments suggest a positive outlook. The market's reaction is likely positive, considering the overall strong financial metrics and future growth potential, despite some caution due to geopolitical risks.
The earnings call presents a positive outlook with strong income growth, reduced interest expenses, and effective debt management. The company is progressing well in supply chain shifts, and the guidance raise due to Q2 outperformance is promising. Despite some cautiousness around pricing impacts, retail partners are largely supportive. Expansion in the DTC channel and new product lines in the lifestyle segment are expected to boost margins. Although the market cap is unavailable, the overall sentiment and strategic moves suggest a positive stock price movement over the next two weeks.
The earnings call presents a mixed picture: strong retail sales growth and improved net income are offset by challenges such as macroeconomic uncertainties, tariff impacts, and supply chain shifts. The Q&A reveals some analyst concerns about price increases and their impact on consumer demand. The lack of clear guidance on price hikes and the absence of a share repurchase or dividend program further temper positive sentiment. Given these factors, the stock price is likely to remain stable, resulting in a neutral prediction for the next two weeks.
The earnings call presents a mixed picture: strong sales growth and improved margins are positive, but concerns about tariffs, economic uncertainty, and lack of share repurchase plan weigh negatively. The Q&A reveals management's cautious stance on price increases and capacity shifts, indicating uncertainty. Despite some positive financial metrics, the lack of clear guidance and potential pressure on consumer demand balance the sentiment to neutral.
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