RCKY - Earnings call transcript Q1 2019

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Operator

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Rocky Brands' First Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. like everyone would is conference I recorded. being Instructions] to this remind call [Operator turn over the of now we'll And conference ICR. to Frey Brendon Please go ahead.

Brendon Frey

thanks us and everyone you Thank to today. joining

may the note update by at defined Private this actual assumptions subject assume are Securities cause of are please we based statements Act the Before to Reform time and Such obligation period, contain forward-looking no and differ Q&A such today's begin, uncertainties, to changes available may materially. XXXX. session, Litigation on statements. that as and which including results risks statements information We to

For year a Securities Officer discussion the December now I'll ended the our conference and release, press please Jason? risks and including complete XXst, to to Executive XXXX. today's refer Chief with the Jason of Brooks, reports turn of Exchange the filed over Brands. for our Rocky Commission, uncertainties, XX-K

Jason Brooks

today's Financial as off Tom With gross Brendon. is Robertson, call margin, you, quarter and first our a Chief our improvements to produced profitability. performance me in Thank solid revenue, is XXXX good on Officer. start

our military of highest up some teens; X.X% retail year-over-year, mid-single-digits; led terms growth single-digits. rate In net in sales overall time up wholesale high up by topline, low and increased our

the past over our initiatives pleased very consistently which executing that we that segments are results quarter We gains years. have better the each three strategic the progress positive making are first of delivered in experienced underscores two continued the

distribution and utilizing brick-and-mortar excellent retail on CustomFit of stimulate reminder our on program commercial factories. personnel; technology providing an investments military improving number of through to and with with the products; capitalize the expand e-tail improved emphasis a great increasing brand efficiency opportunities our As capacity and production are; of demand through partners; with accelerating awareness internal and in and growing Lehigh expansion exciting they consumers key our digital; our support marketing and

back well launched questions. be of military Tom financials commercial through answer had to and Lehigh categories which along any strong marketing X.X% Work quarter, with Marshland, our advantage We last performances reinvest wholesale, our in our the fueled our styles brands: of in in at more additional nice largest low to balance primarily programs quarter strong sales the new financial brand, segment, cash debt. for by happy late then included as first By several go will another orders to improved new Starting significantly our portfolio fast-growing the Georgia end our improved for and operations has March sheet, took support $XX million of the the our portion which in and and of earnings after no and infrastructure Rocky, like cash in Western. double-digit business the our as year of collection Rumbler run Boot. single-digit collection. -- Our a position of segments and growth into for people and Hunting during Rumbler with we'll Georgia quarter Durango, each detail, replenishment I'll review first highlights leading driven gains and by equivalents the increased

keep fact, were much quarter In demand. we for of these and pace products the try inventory expectations on chasing to sell-through first and exceeded with

nice Carbo-Tec for to trend collection and Western gains Logger We terms broad-based momentum. with Western Georgia's retailers of our Zappos also many national top our was continues Comfort with line also Supply, along we demand Core Work of in accounts saw as as of experienced gain versions like the solid growth updated brands Amazon. Tractor the

Durango. to Moving

generate April We Maverick temporary second it sales in headwinds This issue on at quarter by February. of March Sports, pushed demand had been within into prevented anticipate inventory did top following upcoming a receive due this, the Rebel rollout in excited some a key was of to not additional on strong launch QX. were manufacturing and we and majors demand in from we so we're have and collection that year. inventory quarter sell-through which well, for key series styles as being delayed therefore, Cavender's, very anticipate and Rebel new modestly move booked of light our initial few the some and In the up resulted through as we lost about the collections, and our would the until Academy hindsight, out new of Boot in us sales transportation On could capitalizing reoccurring. were sales such driven replenishment assortments congestion. been don't orders stronger this While for strong QX the rest extremely Pro Barn

As Durango's our of awareness as additional reinvestment are spending part to we help position dollars in true of XXXX strategy, drive increased iconic western marketing brand. a

at fall. Brands Hunting be and benefited year this more extended an in winter shaped durangoboots.com out category You was the will continued performance our the the of quarter of some initiatives marketing commercial strength from Starting row. military of businesses. the The can many Hunting, rolling first see by season on a and Rocky for second in these with

rubber marketing in shelf space online. allow additional driving core seeing continued taking been complemented I line believe recent offering. camouflage we've brand via e-tailers and continue programs traffic of both our nice to a and in our market for and increasing and our past are to focus rugged has stores to share boost see waterproof a to at initiatives from a casual, program aimed brand in boot and hunting growth the us of brick-and-mortars. our from invest While quarters boot product awareness outdoor that we nicely which plan perspective, of also several This funds we

the commercial first last starting comparisons, carried we category's quarter. starts However, Meanwhile, business business do tougher therefore trends. momentum into moderate second the in face in to from the I recent want our growth that we our expect quarter, year to out to point and built Hunting the rate military

Our our continue styles paying around across – and base, Dive initiatives to as and entire we Exchange, initiatives Supply experienced high-teen both Air at and build. market which the Army of particular off Domestically, are growth SXV our off go-to over paying Atlantic popular year. our go-to confidence have Force customer with witnessed consumer's awareness market strength in last growth

allow distribution growth the expanded opportunities. with also and the and Marine enlisted during first Guard. uniform of reach us of with the provide military long-term quarter These other soldiers to We the exchange new the us a Corps several larger strategic Navy, including percentage Coast outlets addition

building such as the this U.S. on of allies focus front, completed relationships with the Bahrain, the awareness On international and order. is for we large Kingdom recently generating where increased business a

with again Now to shoe business model. the was sales retail, once continues sustainable same which fastest-growing period Lehigh demonstrate increased year. last growth through differentiated strong XX% division compared to as CustomFit safety our our

Distributors to and we partnership seeing product time, first and includes their to through a productivity events. and launched operational teams. this we a customers thanks deployed the pace an with strong Aetrex National to and as in the on-site existing introduced up field employees expect Owens-Illinois year. iFit process continues customer at expanded later – we acquisitions Frito-Lay added are developed January and at to At a ordering increased offering We signing new scanning measurement equipment, digital retention the in start to enhanced orthotics same account new shipping quarter XXXX, we after in This all product enhance our to offer

this ensure resources there We is to and to year we and deal believe investing capitalize continue in opportunities our to a continue untapped for best potential to the of we plan great positioned business our long-term. Lehigh on are

Sales increased by Turning rates. our low-double-digits e-commerce. to and websites branded conversion from collectively increased higher driven traffic

experience enhance we our platform strive tools in sites to We vehicles. further informational our to shopping commercial have make and as the to continue from investments sales marketing e-commerce to evolve

as were the the slightly headwinds started lap affected segment Finally, XXXX. in industry beginning the quarter business early sales that military the to we in up first

end We our of Department second also early. year of Defense the benefited from as contracts accelerated has the decided to are into us half one pulling from the notified half that current first recently the it of shipments sales

profitability. call now the In and terms that are enhance company. am In the that us utilizing value over we in nothing sense on our core XXs for years financial available changed, this to to make aggressively really we I bid business, the the focus allow range of the return to and greater meantime, from I'll sustainable has are the continue prospects for their all to our will but current gross historical margins drive capacity Dominican to our facilities manufacturing the excellence military expand plans segment commercial driving our and Republic turn course helping this and confident of Tom. in executing production efficiencies the organization we product the our Rico to lines, shareholders Tom? from low in opportunities to improve on closing, throughout Puerto continuing into which operational even ahead. In growth by staying achieve strategies low to mid-teens. is

Tom Robertson

increase sales, of and XX.X%, sales period segment, increase ago, margins retail to first the first compared sales million, versus By quarter first Net million with Gross the retail year. military along $XX.X were quarter percentage or in period. year as the to sales driven compared XXXX. ago. a XX sales. million wholesale corresponding expenses $XX of with $X.XX a as in was sales, diluted of of X.X%, of XX.X% wholesale in follows; marketing well to million, military share, million, segment million, for share, sales to $X.X of increase period. the and year $X.X the prior XXXX, $XX.X or our Jason. million, operations lower in million, certain driven million expense we for year margins $XX.X period military carry $XX.X XX.X%. first The the increased ago. period quarter million the million, aged $X.X the took basis or segments. inventory XX.X% to XX% the compared first was than to investments to approximately Thanks, a in quarter XX.X%, margins and quarter X.X%. in The military Selling, or were an of the higher of sales same general same personnel margins was sales, income growth, a to gross million and last variable million, $X.X by as Gross for income in per diluted to increased from wholesale XX.X%, compared income SG&A for increased or future primarily by year. million, from $XX.X administrative increased of the Income retail to million to to channels. expenses year Net the point or XX.X%, sales, increased for $X.X Retail in million, by in per X.X%, year compared million higher $XX.X or lower which to $X.X increase or some compared increased basis select as profit operations to associated last were period primarily prior XX for $X.XX X.X% move $XX.X opportunity the $X.X $XX support to compared points, through down Wholesale And net discount $XX.X increased and

sheet. balance our to Turning

and XXXX, As be on of the up revenue end expect compared military Inventory of led early than equivalents planned, of to increase the low of to cash the XX, U.S. the X.X%, over our XX.X% divisions. We estimate March a XX, previous date of an XXXX, $XX.X down increase we end range earlier still Based year-over-year million funded million, year XXXX. of a contracts either $X $XX.X on to basis to period. wholesale we March flat. With to our was to on million, end the cash at decision contract sales expect had of year, no of retail remainder XXXX, at one in million respect to by the had $XX.X QX, -- approximately now our same the compared compared and ago. Military's debt we single-digit roughly

our balance remarks. additional the As programs we now we model. prepared portfolio in our marketing and of did BXB to sheet of in business in for brands our our Operator, reinvest plan position concludes our we support authentic to the That and portion unique quarter, utilize first ready direct primarily cash strong questions. a are

Operator

Please [Operator go And Baird. you. with take our Thank we'll first from Instructions] question ahead. Jonathan Komp

Jonathan Komp

expectations? low And year? that headwind know itself maybe maybe what inventory for like drove curious just the military your the versus few the I top upside you the you guidance on if similarly performance talk To out sounded through could constraints I'm up single-digit but growth straightened just still broadly the quarter next are quarters, maybe that's in then total sense with and make have line the ask some now. even maybe X% why

Jason Brooks

kind to are increase question was out -- I regards How of wholesale. me. the you for first cut the think in Jon. you Hey, doing? In So total part of on

came which we I a today, pretty some I new but of we're in this a are and in where customers. we're still We strong in aggressive this The was saw rest with quarter mid think some think rollouts year. had it for with see We wholesale more of comfortable typically pretty from comfortable business pretty that anticipated. standing a stronger our little lot with, single-digit QX, for range, Lehigh business us. new we our the of buying just than will the

back in going come bit a little rest So that's we think year. to the the of

thing, is I those were between them, shortening us then military orders probably two, still same to giving kind earlier I think probably contract. surprised the breath about The really it's contract, in the hear to think so X%, mid And reasonable speed we reasonable. to that of up X%, single-digit still the but think

So probably the this, do business military stuff any bid -- new but like they we easiest to at we've opportunity our not forecast an still us contracts. had is to to until

it's end year So, in the QX substantial. pretty going this to fall off and QX, come of

Tom Robertson

little John, the the had really in commercial international perspective, significant Yes, on we whether was bit year western last our and When about launches new QX in we just year. a some was buy military, wins, really comparison we big a it pile to category Supply, talked few opportunistic of look that a at front, or of from we at wholesale our to had last it a product Tractor here.

And in to lot that the while And think to that the moving a think really lot have, feel those retail new a that on segments, of year. that going we to comparison Lehigh, we you last the of bit seasonality Lehigh folks of programs tough about lot start so of about confident product be the a X offerings -- of it's little we then a year. calendar have, a voucher companies January a

Lehigh So typically in for first quarter the the largest quarter. is

carry up in low single, were be that We to just sure we still up not same we'll digits to Lehigh forecasting for be at or of the double the able retail or throughout that single so were digits the low And year. double high momentum QX high digits to be rest year.

Jonathan Komp

underlying by of like more to little whichever, any color ahead going you business just the you invest revenue performance margin. following up as business by there for last forward? is Okay. or it almost gross a growth specifically, of market wondering, I that two curious wholesale come you the And for That's expect the underlying X% business. for was picture helpful. the business of quarters X%. I'm looks the Maybe in since any I'm wholesale up a end know there up kind easiest from on rate, clearer it look just more that is and brand, the then where

Jason Brooks

I our simple view, point least from it really Jon. of at is Yeah. --

invest to in brand awareness from continuing those are a We brands standpoint.

we it introducing in channels we today. job the to new for are So been years. customers and in doing We doing just we're our it same it brand believe that doing we've a of better think we're

through to people space we're getting So of AAFES the that commercial we believe the more Boot believe stealing Barns driving in in our the more We world. we believe We shelf military. are the we're stores websites. business

seeing it. areas, really XO-TOE introduced, all a think some and I that We benefits amount that focus product we tremendous creative So we think have just think of out being had came the is from we've of cool. on, the those we're

burns. them is to be I slow see going see to to going I ever going XX% by they're you're this takeoff think don't XX%, think think build. starting you're but I to well

same And again things so we I and same in channels, we're space. some just focused the taking and distribution on shelf doing over think are over the

Jonathan Komp

the and think I better -- know balance And about perspective? you're to want investments year-over-year performance growth How we good also targeting of quarter. the follow-up I margin revenue do down incremental slightly the And flat that expect going what a of to then first or operating top from leverage during a you forward. maybe XXXX. lower had pace see should in going I great. on Okay, margin G&A just a forward? But the you line know

Jason Brooks

So, took some had were I -- know this, of inventory. some to in going We moving some were that Tom's customers want very in interested but aggressive QX on up to jump cleaning items. we we discontinued in

took it. And with our so ran season, and show during department sales the it

to sales and So as where bit I our we to then relationship our little well. be rebound will in a think going margins are think

So something? Tom want you to add

Tom Robertson

operating understand retail our some operating the From wholesale expenses I Jon, standpoint something pretty seasonality of you such the think -- in strong clearly Yes. third because strong sales strong -- quarter. on have fourth mean we sales in we and quarter to how could such sales

more you of year, first idea, shipping sales investments at in the during to And is lot strong the containers sales grow customers. such shipping variable retail see from a our quarter get time quarter some impacted faster -- lot than other can you out when historically see the even our the standpoint, that one Certainly dollar more is expenses the and it a us to pairs is in in a we're see wholesale -- to think than spend. two carry or our think a really going those But same about goal and segment expensive you a there. I increase we'll in fourth play a operating uptick if so that at rate and that we're thing thing making the spend the the not to entire an if SG&A

chunks the So in this was segment. that's the of quarter retail increase our biggest where

And -- success and going continue to climb so such Lehigh see to as to our we the of as continue quarter, in first sales. e-commerce rate operating continue that if business we're see had expenses those a they a to percentage see

then And last eye the we've so got on. we definitely And our something keep about earnings of investments top that the we're few calls. it's on talked that for

Jonathan Komp

follow-up there kind can the just maybe some you perspective results you're any the there share seeing sales of real you're off? investments Are or investments some evidence any the other Okay. made? that the from then paying from marketing you making as And any payoff of signs a of or is behind

Tom Robertson

an a So there probably And traffic to traffic see for it's will marketing hard to ads the when exact it's where see right is in doing we've sales. you QX. Jon. and search in management We can we're Google can we've that's our in seen challenge teams track invested big money I website. the you've optimization, flow increases relationship. military up where can especially our in certainly We we did tell increases But pay-per-click very always seen significant is largest but dollars most whether the marketing commercial e-commerce or It's what is tell category. most And you outdoor I our very spent we've difficult.

Jason Brooks

XXXX all QX the in last rolled I XXXX, it and mean out really we of last of year of getting Yes. materials together beginning process the QX at and the in year. of -- started really

where seeing commercial so increase And and think that's in this we military. outdoor we're particularly

believe then. you will touching believe that truly more it's we that people. tell We XXX% we department the Now Jon marketing -- that are

And marketing door changing new people the when driving -- have retailers walk shelves they of is it a it and that and new in-store people some as we're with excite relationship what that then just from or in slot more we be that educating definitely the wall are POP, the things well. is standpoint think business. doing We our we

Jonathan Komp

ones two Maybe I if Great. Okay. could. last

inventory, of going the we first growth been Just growth, higher should quarters think on have couple in of wide You've had year-over-year maybe forward? some about even how the areas. too a but

the model forward? plan going should how So we in it

Tom Robertson

Yes.

chunk our think down of do we've take whittle room inventory Obviously, tried a think bit we little little to levels, -- we I when bit. forecast got I a of a little bit to to islands -- with try more raw QX expand inventory discontinued bigger sales. our our in our on some of purchases at bought that We've margins a materials. give to

category, new in Our now biggest really inventory product is in that's in-transit is that's our so coming. increase

in very So, inventory. we about comfortable increase and obviously feel good the

from do at is to down goal number Our for the in end going quarter was the inventory the going that us, get a of year, XXXX. at end think we're to each it slightly to where bit, be little of the have I of but up

Jason Brooks

higher want bit the to wrong Jon why To Yeah. have is of a here job do inventory higher boots. and that's not your the right damn boots to a it better I point, too. it, than getting add we little Because our and because better have be we right And stuff. the not sales would little things. inventory the stuff we been bought a wrong could now, some a could if should just have have missed right our we had little and

So, excellence And us. we're and that. a about not that of will get category for we've out control in falls lot this operational and focused on that talked

Jonathan Komp

Always last certainly either challenge. just one of the Maybe for then the you.

I -- you and be you specifically? the second quarter think wholesale year? business model, from the we so just clear to given to comparison as Or look still versus But last the sales about be can sorry do just piece the the that maybe grow think should for tough comparison, how specific. Just wholesale through

Tom Robertson

one-time we like buy Yeah. big again, a don't specific last to earlier western year to I opportunistic call, I as really give guidance. in we But had a the alluded mean, category. the very on

a year. of expecting to last We of pretty We're much QX expecting not increase wholesale in will that not from -- be is. kind a perspective. QX for We're sales happy comp against

Jonathan Komp

Okay. Great. Make sense.

for and me that’s questions. that’s the taking think thanks -- for I all about it

Jason Brooks

Thank Absolutely, Jon. you.

Operator

turn no to remarks. conference management I'll back are questions. there closing further for the And

Jason Brooks

thank quarter. in And questions, Great. want everybody. on Rocky Brand really we the other team great a If appreciate there is to you -- Thank no much.

Operator

your participation. Thank And for this today's concludes conference. you

may now disconnect. You

Rocky Brands (RCKY) 23 Apr 192019 Q1 Earnings call transcript