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ROCKY BRANDS, INC. (RCKY)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered solid execution: net sales $122.5M (+7.0% YoY), gross margin 40.2% (+210 bps YoY), and adjusted diluted EPS $1.03 (+34% YoY), driven by strong demand for XTRATUF and improved mix/pricing .
  • Versus S&P Global consensus, adjusted EPS beat ($1.03 vs $0.90*) while revenue was essentially in line/slightly below ($122.5M vs $122.9M*); management reiterated FY25 guidance (rev +4–5%, GM ~38–39%, EPS +~10% YoY), but flagged Q4 as the peak tariff headwind .
  • Operating income rose 16.5% to $11.7M (9.6% margin), with interest expense down to $2.6M on lower debt and rates; inventories rose 12.7% YoY largely on tariff costs; total debt was $139.0M, down 7.5% YoY .
  • Brand highlights: XTRATUF continued double‑digit growth across wholesale and e‑commerce; Muck sustained momentum; Durango softened as orders pulled into Q2 and sourcing shifts caused delays; management expects sourcing diversification and in‑house production to mitigate tariffs into 2H26 .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth and margin expansion: revenue +7.0% to $122.5M; GM +210 bps to 40.2%; operating income +16.5% to $11.7M; adjusted EPS +34% to $1.03 .
  • Brand strength led by XTRATUF: “demand for the brand remains strong across our wholesale and e‑commerce channels” with continued momentum and new collections/collaborations; management: “we delivered another quarter of solid results amidst a challenging operating environment” .
  • Tariff mitigation actions in place: CEO highlighted price increases and supply chain diversification (Dominican Republic and Puerto Rico), with CFO adding 2026 plan for ~50% in‑house production and reduced China exposure, supporting a return to high‑30s/low‑40s GM% in 2H26 .

What Went Wrong

  • Tariff pressure and elevated inventories: Q3 GM faced ~160 bps headwind; inventories up 12.7% YoY (to $193.6M), with ~$17M tariff-related cost on the balance sheet (about $10M to flow through Q4) .
  • Durango and supply chain delays: Durango saw delayed shipments and pull-forward orders into Q2 ahead of price hikes; management cited a “few million dollars” of delayed sales due to sourcing transitions (India/Cambodia/Vietnam) .
  • Q4 margin caution: management expects Q4 2025 to be the worst quarter from a tariff perspective before improving in 2026; SG&A up dollars for marketing/logistics with limited leverage in Q4 .

Financial Results

Consolidated Results vs Prior Year and Prior Quarter

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($M)$114.6 $105.6 $122.5
Gross Profit ($M)$43.6 $43.3 $49.3
Gross Margin (%)38.1% 41.0% 40.2%
Operating Income ($M)$10.1 $7.2 $11.7
Operating Margin (%)8.8% 6.8% 9.6%
Net Income ($M)$5.3 $3.6 $7.2
Diluted EPS ($)$0.70 $0.48 $0.96
Adjusted Net Income ($M)$5.8 $4.1 $7.8
Adjusted Diluted EPS ($)$0.77 $0.55 $1.03

Notes: Adjustments primarily exclude ~$0.7M acquisition-related amortization; see non‑GAAP reconciliation .

Segment Revenue

Segment ($M)Q3 2024Q2 2025Q3 2025
Wholesale$84.0 $73.1 $89.1
Retail$26.8 $29.7 $29.5
Contract Manufacturing$3.8 $2.8 $3.9

Segment Gross Margin Rates

Segment GM (%)Q2 2025Q3 2025
Wholesale40.3% 39.5%
Retail45.2% 46.8%
Contract Manufacturing12.4% 6.9%

Balance Sheet / Cash Flow KPIs

KPIQ3 2024Q2 2025Q3 2025
Cash & Equivalents ($M)$3.7 $2.8 $3.3
Inventories ($M)$171.8 $186.8 $193.6
Total Debt, net of issuance costs ($M)—$132.5 $139.0

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025 call)Current Guidance (Q3 2025 call)Change
Revenue growth vs 2024FY 2025+4% to +5% +4% to +5% (reiterated) Maintained
Gross marginFY 2025Down ~70 bps to ~38–39% Down ~70 bps to ~38–39% (reiterated) Maintained
SG&AFY 2025Up in dollars with modest leverage Up in dollars with modest leverage (reiterated) Maintained
EPS growth vs 2024 ($2.54)FY 2025~+10% YoY ~+10% YoY (reiterated) Maintained
DividendQ3 2025$0.155 per share (declared Aug 18) —Informational

Management color: Q4 expected to be the worst quarter for tariff impact; benefits from sourcing shifts/price increases ramp through 2026 .

Earnings Call Themes & Trends

TopicQ1 2025 MentionsQ2 2025 MentionsQ3 2025 MentionsTrend
Supply chain & sourcingPlan to mitigate tariffs via price increases and shifting out of China; leverage DR/PR plants Ahead of schedule moving to DR/PR; monitoring tariff developments 2026 plan ~50% in‑house; diversify to Vietnam/Cambodia/India; only ~10% of total imported from China into U.S. in 2026 Increasing in‑house mix and geographic diversification
Tariffs & marginsImplementing price increases; aiming to protect profitability FY25 GM down ~70 bps on ~$11M tariff headwind; stronger Q3 than Q4 Q3 GM pressured ~160 bps by tariffs; Q4 to be worst; improvement through 1H26 as tariff-loaded inventory works through Near-term headwind, medium-term mitigation
Product/brand performanceHealthy demand; retail +20% growth XTRATUF fastest-growing; Muck best comp since 2023; broader outdoor momentum XTRATUF continued acceleration; Muck strength; Durango softer on pull-forwards and sourcing delays Outdoor strength broadening; watch Durango
Consumer & channelsSolid sell-through; raised prices coming Cautiously optimistic; DTC trends steady post-price increases Consumer choppy week-to-week; e‑comm recovered after platform transition; marketplace strong Mixed but resilient
Regulatory/macroTariffs a key focus Monitoring further tariff actions (Aug timeline) Tariffs peaking Q4; guidance reiterated with caution Managed with pricing/sourcing

Management Commentary

  • CEO (press release): “We delivered another quarter of solid results… The improvement in our top-line was led by XTRATUF… strong full price selling, select price increases… and favorable brand and channel mix contributed to over 200 basis points of gross margin improvement… We believe the actions we have taken… will help to offset some of the impact from the higher tariffs… We are confident… to fully capture the growth opportunities we believe exist in 2026 and beyond.” .
  • CFO (call): “Approximately $17M… incremental tariffs on our balance sheet; roughly $10M will flow through our P&L in the fourth quarter… Q4 2025 will be the worst quarter from a tariff perspective, and we’ll only start improving from there.” .
  • CFO (call): “For 2026, we project that we’ll manufacture approximately 50% of our inventory needs in‑house… Approximately 20% [produced] in China; only half of that… imported into the U.S.” .
  • CEO (call): “We are pleased with our third‑quarter results… Sales increased 7%, gross margins up 210 bps, adjusted diluted EPS of $1.03… Our teams have done a great job navigating higher tariffs.” .

Q&A Highlights

  • Consumer/backdrop: Management described the consumer as “dynamic” and “unsettling,” with week‑to‑week variability; e‑commerce recovered after a platform transition; marketplace growth strong double digits .
  • Supply chain delays: Sourcing diversification created 3–4 week delays, with “a few million dollars” of sales pushed; Durango most impacted due to historical China exposure shifting to Cambodia/India .
  • Q4 margin cadence: Despite pricing actions, tariffs loaded in inventory will depress Q4 margins most acutely; improvements expected thereafter into 2026 .
  • 2026 outlook: Orders and bookings up YoY in dollars and pairs; XTRATUF accelerating with new cold‑weather line and broader inland adoption .
  • Channel mix: Lehigh B2B up high single digits; DTC websites/marketplaces vary by brand with XTRATUF leading online penetration .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Adjusted EPS $1.03 vs $0.90* (beat); Revenue $122.5M vs $122.9M* (slight miss); Consensus EBITDA $15.0M* vs internal performance driven by 40.2% GM and 9.6% operating margin .
  • Forward (Q4 2025) S&P Global consensus: Revenue $134.1M*, EPS $0.485*, EBITDA $9.9M*—management expects Q4 to be peak tariff headwind, implying risk to margin trajectories even if pricing supports revenue .

Estimates marked with * are Values retrieved from S&P Global.

Q3 2025 Actuals vs S&P Consensus

MetricActualConsensus
Revenue ($M)$122.5 $122.9*
EPS (Adjusted Diluted) ($)$1.03 $0.90*

Q4 2025 S&P Consensus

MetricConsensus
Revenue ($M)$134.1*
EPS ($)$0.485*
EBITDA ($M)$9.9*

Estimates marked with * are Values retrieved from S&P Global.

Key Takeaways for Investors

  • Adjusted EPS beat and margin expansion demonstrate pricing/mix resilience despite tariff pressures; however, management’s warning that Q4 will be the worst tariff quarter tempers near‑term margin expectations .
  • Brand momentum is led by XTRATUF (double‑digit growth) with Muck also strong, while Durango softness and sourcing delays are near‑term watch items; sustained e‑commerce/marketplace strength supports mix .
  • FY25 guidance reiterated (revenue +4–5%, GM ~38–39%, EPS +~10% YoY), implying confidence in pricing and sourcing actions to absorb Q4’s tariff headwinds and set a base for recovery in 2026 .
  • Inventory build and ~$17M tariff costs embedded in inventory suggest cash conversion/margins will tighten near term as ~$10M flows through Q4 P&L; debt remains controlled, down 7.5% YoY .
  • Medium-term thesis improves as in‑house manufacturing scales toward ~50% in 2026 with reduced China exposure, targeting a return to high‑30s/low‑40s GM% by 2H26 .
  • Trading lens: Near‑term volatility likely around Q4 margin compression; focus on signs of tariff cost digestion, realization of price increases, and pace of in‑house production ramp in early 2026 .
  • Dividend continuity ($0.155/share declared in Q3) underscores capital return discipline even amid tariff headwinds .