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ROCKY BRANDS, INC. (RCKY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean beat on both adjusted EPS and revenue: adjusted diluted EPS $0.73 vs $0.52 consensus (+40%) and revenue $114.1M vs $112.7M consensus; GAAP diluted EPS was $0.66 as gross margin expanded 210 bps to 41.2% and interest expense fell materially on last year’s refinancing . Consensus values marked with an asterisk are from S&P Global; “Values retrieved from S&P Global.”*
  • Management reiterated full-year 2025 guidance despite new tariff headwinds, planning broad price increases in Q2 and accelerated sourcing shifts out of China to protect gross profit dollars; FY EPS still expected just below 2024 adjusted $2.54 .
  • Retail segment strength (+20%) and mix shift toward higher-margin channels drove record Q1 gross margins, while wholesale softness reflected timing shifts and category-specific headwinds (Durango sell-in moderation, Georgia Boot orders slowed in March) .
  • Balance sheet progress continued: total debt down 17.5% YoY to $128.6M; inventory was intentionally built ahead of tariffs to buffer transition capacity, supporting confidence in guidance and supply continuity .
  • Dividend maintained: $0.155 per share payable June 16, 2025 (record date June 2, 2025), underscoring capital return alongside deleveraging .

What Went Well and What Went Wrong

What Went Well

  • Record Q1 gross margin and margin mix tailwinds: Gross margin rose to 41.2% (+210 bps YoY) on better full-price selling and a higher proportion of retail sales; segment gross margins: Wholesale 40.3% (+390 bps), Retail 45.7% (-300 bps), Contract Manufacturing 5.8% .
  • Retail momentum and brand strength: Retail sales +20.4% YoY to $36.6M, with strong DTC marketplaces and Lehigh safety business (high-teens growth; third consecutive double-digit quarter). “Our first quarter performance was highlighted by 20% top-line growth in our retail segment…” — Jason Brooks .
  • Interest expense down and deleveraging: Interest expense fell to $2.4M (from $4.5M) on April 2024 refinancing and lower debt; total debt down 17.5% YoY to $128.6M, aiding EPS leverage .

What Went Wrong

  • Wholesale softness and category-specific headwinds: Wholesale -6.3% to $74.8M; Durango sell-in moderated on tough comps and timing shifts; Georgia Boot orders slowed in March amid uncertainty .
  • Tariff-driven margin pressure ahead: Management expects modest YoY gross margin decline for FY-25 (vs 2024) including ~110 bps headwind from earlier 10% China tariff increases, plus additional pressure from March/April actions, to be offset by pricing .
  • Contract Manufacturing and military/duty declines: Contract Manufacturing was flat; commercial military/duty down vs early-2024 blanket purchase benefit; note a discrepancy in CM revenue disclosure ($2.7M press release vs $2.6M remarks) that does not impact consolidated results materially .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$114.6 $128.1 $114.1
Gross Margin %38.1% 41.5% 41.2%
Operating Income ($USD Millions)$10.1 $8.5 $8.7
Operating Margin %8.8% 6.6% 7.6%
Interest Expense ($USD Millions)$3.18 $3.04 $2.36
Diluted EPS (GAAP, $)$0.70 $0.64 $0.66
Adjusted Diluted EPS ($)$0.77 $1.19 $0.73

Q1 2025 vs S&P Global Consensus

MetricConsensusActualSurprise
Revenue ($USD Millions)$112.7*$114.1 +$1.4M (+1.2%) — bold beat
Adjusted Diluted EPS ($)$0.52*$0.73 +$0.21 (+40.4%) — bold beat
Values retrieved from S&P Global.*

Segment Sales Mix (Q1 2025 vs Q1 2024)

SegmentQ1 2024 ($M)Q1 2025 ($M)YoY Change
Wholesale$79.8 $74.8 -6.3%
Retail$30.4 $36.6 +20.4%
Contract Manufacturing$2.7 $2.7 Flat

Segment Gross Margins (Q1 2025)

SegmentGross Margin %
Wholesale40.3%
Retail45.7%
Contract Manufacturing5.8%

KPIs and Balance Sheet

KPIQ3 2024Q4 2024Q1 2025
Cash & Equivalents ($M)$3.7 $3.7 $2.6
Inventories ($M)$171.8 $166.7 $175.5
Total Debt, net ($M)$150.3 $128.7 $128.6
Weighted Avg Diluted Shares (M)7.50 7.49 7.49
Dividend per share ($)—$0.155 (declared Feb 18, 2025) $0.155 (to be paid Jun 16, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2025Low single-digit increase vs 2024 Low single-digit increase vs 2024; pricing in Q2 offsets lower volumes Maintained
Gross Margin %FY 2025Decline modestly YoY; ~110 bps headwind from earlier 10% China tariff Additional pressure from Mar/Apr tariffs; aim to maintain gross profit dollars via pricing Maintained (added tariff headwinds)
SG&AFY 2025Up in dollars; similar as % of revenue Up in dollars (marketing/logistics), similar as % of revenue Maintained
EPSFY 2025Just below 2024 adjusted EPS $2.54 Just below 2024 adjusted EPS $2.54 Maintained
Pricing ActionsQ2 2025Not previously specifiedBroad price increases early June across majority of styles Introduced
Sourcing MixFY 2025Ongoing diversificationChina share <20% by year-end; accelerate shifts to Vietnam, Cambodia, India, DR, PR Strengthened
DividendQ2 2025$0.155 declared Feb 18, 2025 $0.155 payable Jun 16, 2025; record date Jun 2, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroSoft consumer/ weather headwinds; positioning for profitable growth Not highlighted in PR; focus on DTC and debt reduction Higher tariffs drive Q2 pricing, sourcing diversification; plan to preserve gross profit dollars Intensifying headwind; proactive mitigation
Supply Chain/SourcingMulti-brand/channel resilience Logistics costs elevated with retail mix Accelerating shift out of China; buffer inventory; DR/PR capacity leveraged Rapid transition underway
Product PerformanceLehigh + Durango offset wholesale declines Durango and XTRATUF strong; highest-ever retail quarter XTRATUF double-digit growth; Muck stronger on winter; Georgia Boot slowed in March XTRATUF momentum; mixed in work/western
Retail/DTCRetail up 9–16% amid higher margins Retail +15% in Q4; DTC strength Retail +20%; marketplaces clearing discontinued inventory; Lehigh high-teens growth Strengthening
WholesaleDown YoY; categories weak (work/outdoor/military) Wholesale down 5% reported; ex non-recurring +4.5% Wholesale -6.3%; bookings accelerating for H2 Stabilizing bookings; near-term softness
Leverage/InterestRefinancing lowered interest and debt Interest down; debt -25.7% YoY Interest $2.4M; debt -17.5% YoY; some Q2 borrowing to fund tariff-advance inventory Improved structurally

Management Commentary

  • “We experienced healthy demand across our brand portfolio… 20% top-line growth in our retail segment… Better full priced selling and a higher proportion of retail sales led to a 210-basis point increase in gross margin… and resulted in a 77.9% increase in Q1 2025 adjusted net income.” — Jason Brooks .
  • “Based on current tariff rates, we expect to implement price increases on the majority of our footwear styles in early June… we are moving faster to reduce the amount of product that we source from China… our diversified sourcing structure… will allow us to achieve our financial targets for the year.” — Jason Brooks .
  • “Gross profit was $47 million or 41.2% of sales, the highest gross margin we’ve ever reported in Q1… Wholesale up 390 bps to 40.3%, Retail 45.7%, Contract Manufacturing 5.8%.” — Tom Robertson .
  • “We are reiterating our prior full year 2025 guidance… revenue low-single-digit increase… expect gross margins to decline modestly YoY… hold gross profit dollars consistent… SG&A similar as a percentage of revenue… EPS just below last year’s adjusted $2.54.” — Tom Robertson .

Q&A Highlights

  • Tariff mitigation and sourcing shift: Using ~6–7 months inventory buffer to accelerate migration; target China <20% by year-end, with some China output redirected to international markets .
  • Pricing strategy: Broad price increase in June to preserve gross profit dollars while defending shelf space; retailers prefer single holistic adjustment over surcharges .
  • Wholesale health and consumer absorption: Bookings strong into fall; consumer/retailer response not panicked; monitoring potential shelf scarcity as peers pause China flows; DR/PR capacity is strategic advantage .
  • Guidance math clarification: Price-driven revenue lift with potential volume softness; objective is maintaining gross profit dollars and keeping EPS just below 2024 adjusted .
  • Capacity availability: 90–92% of products have identified non-China homes; ramp expected in 90–120 days; long-standing partner relationships in Vietnam/Cambodia reduce execution risk .

Estimates Context

  • Q1 2025 delivered a beat vs S&P Global consensus: adjusted diluted EPS $0.73 vs $0.52*, revenue $114.1M vs $112.7M*; the beat was driven by higher gross margin mix and reduced interest expense . Values retrieved from S&P Global.*
  • Implications: Street models likely raise FY gross profit dollars and adjust channel mix; watch for margin percent compression in FY-25 due to tariffs despite pricing offsets .

Key Takeaways for Investors

  • Pricing + sourcing agility underpin guidance resilience: Early-June price increases and accelerated shifts out of China support preserving gross profit dollars and maintaining EPS trajectory despite tariff headwinds .
  • Channel mix is the near-term margin lever: Retail/DTC strength and improved wholesale mix produced record Q1 gross margins; monitoring retail momentum into Q2 post-pricing .
  • Deleveraging and lower interest expense enhance earnings quality: Interest down to $2.4M and debt -17.5% YoY provide cushion against macro/tariff shocks .
  • Brand momentum is broadening: XTRATUF double-digit growth, Muck re-acceleration on winter, Rocky Work/Outdoor growth; Georgia Boot softness bears watching into Q2 .
  • Watch bookings conversion and inventory normalization: Elevated bookings for H2 and intentional inventory build to front-run tariffs suggest Q2 borrowing transient; second-half working capital release expected .
  • Dividend continuity signals confidence: $0.155/share payable June 16; reinforces balanced capital allocation amid ongoing deleveraging .
  • Risk monitor: Tariff policy volatility, consumer price elasticity post-increase, execution risk in factory transitions; however, DR/PR self-manufacturing and diversified partners are strategic mitigants .