RCKY - Earnings call transcript Q1 2020

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands First Quarter Fiscal 2020 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. Instructions] [Operator

Please to I this conference will Brendon of like being call over everyone Frey and recorded now ICR. remind would conference that is to I ahead. go turn the

Brendon Frey

thanks and today. joining Thank you, everyone us

Before the period, we defined the may including Reform Litigation as Q&A Private statements begin, Securities that forward-looking Act session, note by please today’s contain of XXXX.

to to may on information no update this materially. are subject at cause assume and time which uncertainties, results available based changes, assumptions are obligation and statements such differ Such We statements. actual risks and to

For uncertainties, XX-K and our a today’s and complete our discussion refer release including XXXX. of Commission, for the the Securities risks press the Exchange please and year reports ended with filed XX, to December

conference Officer over Chief the Brooks, Jason? turn of Brands. Jason Executive to now I’ll Rocky And

Jason Brooks

call With you, Chief Officer. Brendon. Thank on Financial me Tom our Robertson, is Today's

indicated, our in and track in while year growth business. improved And momentum XXXX into and of for As profitability. headwinds good facing sales performance XXXX were with solid on our year, few we margin were we we another came a the early

Like many plans and due to projections near-term the Covid-XX companies, been significantly pandemic. have our interrupted

salute everyone frontlines First are foremost, thoughts and on by battling those with our virus this we this and global emergency. all the affected health

to a missed this including great haven’t teams our the want at essential distribution up day every facilities situation. businesses since dedicated who unprecedented also acknowledge We employees start show in the work that continue to to shift center with our

that spend extent I our a current circumstances, environment, and am for typically makes During think our the In sales review segments. of and current financial going QX earnings our light review and an time results our don’t flexibility. providing the of framework of to actions it rest protect our To sense. brand a I call, provides strengthen quarterly I on our moments and our we’ve liquidity few and the employees our to results the and business state the taken will update Tom spend I then by on

net $XX ago. were effect down $XX price in wholesale sales in pull forward total of the the approximately to sales segment approximately plus a early compared year quarter, business primarily to softness military some with X. certain reductions million, the For planned slightly on first our deliveries into We increases January from initially be that went a anticipated on million ahead

work Phase outbreak tracking XX back signing U.S. the went mid-March. following in We were the prior – the also the of also and China. additional through that into of X gross that forecasted forecasting to broadened plan to sales the by low tariff was the double-digit was increase driven to February in we X.X% margins deal effect low pressure the to retail segment we QX XX% with Covid-XX as between through inventory prior close QX

all As several their became and an businesses we in at our particularly channel accounts states announced the replenishment stay planned immediate closure orders. cutting impact and implemented non-essential demand, directives, of many deliveries back wholesale on as saw home

wholesale our closed. are of partners Today, third estimate we stores a approximately currently

to roughly Fortunately, our protect consumers the and or respective by essential must functions two-thirds who citizens, governments their execute on fight virus, to designated this businesses that state were either maintained jobs they remain need during crisis. serve be

an branded through that on has service our customers retail announced our continue supporting allowed This essential customers center Ohio as to infrastructure distribution program. in open, Importantly, as us March Logan, decision Lehigh business Safety websites Shoe XX, directly our on deemed well we operation. remain was as our

in they our decreased seeing results. with that that are For are open, the traffic retail they and doors to-date are dealing QX obviously levels

our a strong self-isolation. during work where this from in behavior our particularly However, Footwear for of consumers online DC, Western operations customer ship in drop e-commerce wholesales experienced we period as towards our accounts we’ve further orders demand purchasing with shifts spike

Lehigh, than retail more in starting infrastructure, in as functioning food and With our critical segment, to currently with many half industries we and shoe of respect such as agriculture, operate believe customers waste pharmaceutical our are column. safety

that businesses once we those facilities are closed, fittings online. For back rescheduled come temporarily be to being pent-up are there expect demand and these

model Finally, in past an easy driven safety provides we’ve the several to safe way over for and online new actually required employees the for professions outfit smaller circumstances as their signed and up accounts footwear. shoes with move have hundreds of increased month our current business workforces the an

start all the conversions. up in and Rocky Sales ecommerce and a double-digits strong Georgia branded have experienced to Meanwhile, on driven Boot second new users Boots quarter. website by gains strong are our wranglerboot.com robust

pleased at less am than full on to temporary Based to Rico report government-mandated I Republic following cost. have operating the demand, Dominical Puerto manufacturing reopened. current and that facilities in to both on shutdowns are reduce capacity

the they structure. benefits of our integrated However preparing manufacturing highlighting are vertically needed, up back ramp to as

our The end a third-party in contract March, the for we delayed a than cancelled over approximately purchase demand. have that million XX% of sheet for of good to from couple more is over news resourced is online core that year. period, manufacturers, been our overall balance in inventories months the For on have slowdown styles at next due $XX orders of or the

and allows ensure is one taken includes in conditions, individuals little for This operating a priority job home steps very difficult our unprecedented are a number At us if the and to of lifetime. allowing we’ve to These our work from of health of our number the their safety. times function employees it. many their certainly Rocky, most have risk is are there write-down. So faced

person have them have For teams. in we split we into center, distribution two our those XX

appropriate all keep operations, distance to during a are feet apart on including is all keep temperature beginning being each sanitizing conducting utilized ensuring and top work areas beginning at at shift, to equipment in before this, are structuring each of work we of employees We way the times, all readings and station breaks. staff six

our of adapting organization I and many recent is am extremely to temporarily the normal. challenges new new what responded way has the to hope all we proud the

stepped people to and products. providing communities, and manufacturing in delivering jobs, have on discounts and to food, and workers, our essential and addition those military our across preparing responders up In U.S. masks donating need first the by executing organization, support their healthcare

I profitability and am on value deliver strength and that to the get confident combined us for of back balance our well-positioned people, our our generate weather allow our storm shareholders. will to growth enhanced track sheet sustained increased and and this brand to emerge

more over I'll now call to Tom, turn will the in financials review detail. the who

Tom Robertson

Jason. Thanks,

of quarter the in be pressure a are year-over-year ultimately revenue The down the share year earnings from down to mentioned $XX.X at we of COVID-XX be call, compared million more per due margins XX.X% on declined As slightly ago. to revenue added Jason million, with start even and to our tariffs. to QX planning first $XX.X higher impact the

decreased By million increased X.X% $XX Retail million. million. to segment, sales military XX.X% sales and decreased sales wholesale X.X% to $XX.X to $X.X

quarter manufacturing or profit $X to was $XX facilities the $XX.X to in of COVID due million Gross compared XX. of of related the our million expenses temporary approximately year. gross sales million XX.X% first sales in closure margins same or XX.X% This last include the to year's period

carry a for basis sales, sales. than over increase XX.X%. margin year gross higher percentage The first gross which gross margin adjusted military point wholesale XXXX in higher primarily the XXX last of expenses, were and these quarter retail the margins by Excluding of was driven

compared Adjusted gross first were Selling, segment and $XX.X XX.X%, general in were of of by sales Wholesale, military, million and to margins quarter expenses XX.X% or million XX% as the net retail, XX% follows: XXXX administrative of or XX.X%. year. sales $XX.X last net

steps we’ve eliminated budget. our structure XXXX COVID-XX, approximately million Since today and taken the expense to from of outbreak reduce $X.X our have

million realize year reduction For in incentive a additional including our we savings compensation. approximately potential of this could $X

the Adjusted X.X% from the from X.X% of operating net sales sales. or decreased compared excludes million to operations $X.X of ago $X.X our facility Income million $X.X income, year or which was in million of sales manufacturing X.X% net net expenses shutdown or period.

diluted million net year quarter share for million Adjusted million net ago was for compared or $X.X income or $X.XX of a diluted to or in was the income $X year per share. XX% diluted period. per $X.XX share income the per Net $X.X

a first XXXX cash in $XX.X cash $XX.X cash million balance cash at XX, of and $XX down totaled of our equivalents increase equivalents the to our the position, drew March financial was and Turning we and March. to facility cash at position our compared the at flexibility, a bolster in end credit QX sheet, XXXX. on To beginning of million which strong very quarter, million

million, at end the Inventories the compared $XX.X and at first year. last at XX million quarter were $XX.X XX to December million March of $XX.X

months levels work position – our down of adjusting future receipts from over current quarters with said, next third-party over couple demand. the better of we’ve is align started next Jason plan the suppliers our inventory to our to couple As already or and our

core the we XXXX has that approximately at Due XX% uncertainty outlined we to reiterate, been in our will withdrawing On not current how To by providing an of the inventory and that created is time. product from line COVID-XX, we unfold in are quarter revenue thought perspective. February, this fourth call a update year-to-year. our view

are we prepared for now remarks. the questions. concludes That ready Operator,

Operator

go first to of I Instructions] will Komp [Operator Jonathan Baird.

Jonathan Komp

so just the Yes. you the non-GAAP that excluding the you. rationale the to share to out? Hi. called first for I versus start, or just million could disclosure, Thank want GAAP you $X

Tom Robertson

John. Yes,

the had to we hit and effectively, to the treatment hurricane is Rico. quarter. were not go same is overhead just you Effectively, is cost our under when we capitalize this we Puerto the XXXX allowed inventory that we bore not through had did So the to and this with this accounting, but that in labor

indicative operation anticipate second into the quarter, in type So leaked we'll adjustment because second although the of it's similar of have forward, not do I quarter. shutdown the moving the

Jonathan Komp

you so are And if by that? you margins gross excluding Okay. do have unadjusted, not segment chance

Tom Robertson

XX.X%, Yes, by was gross military unchanged will yes, that retail segment and – segment, will at XX.X% XX.X%. be unadjusted unadjusted wholesale remain margins

Jonathan Komp

around there? question, a maybe I lack out And of you of businesses seeing the size of out just guess, few I relative of strength. Thanks. seeing the the clarity are lot given that think are uncertainty maybe you broader where called the you Okay.

in from Is comment that type for look you you perspective? can of total of your trend the seen it there April, the line guide at business revenue six if the even and March on have maybe parts any or a you weeks or so, last way

Tom Robertson

Yes.

understand the are I in sure we make just six kind trends to of looking last that forward. question, the weeks, just is So

Jonathan Komp

of share little all couple bit total of I strength. you trying a could revenue months perspective you of the get or a some relative you sense the size just business pieces. From those stands know know here? called I last was if just the a better relative to of where out the areas more. over But

Tom Robertson

our wholesale too I think not that about for that reason – are line then, they Yes. Jason if stores, are about And are what specific people too, goods still certain Without more customers think need giving shutdown. wholesales to alluded but looking going - when I the foot with seeing to am business, our John, the open, the about of essential you purchases are that two-thirds they footwear think are businesses. do to start third I of into think type are of traffic. you decreased are essential about stop a They that, not also they And you products.

proportion Lehigh think we retail half if just is at his in over you the our Jason look biggest that prepared as said well, about total, so open are customers as the and business, remarks retail When segment. segment our of of in retail

marketplace our look has at growth $XX to the increase were last said, stronger year. business, being the million for in even the particularly military weeks over kind and last there. guiding it’s of segment, our and And that e-commerce business our week That retail if number business then a sales from significantly retail so, you or six we

the be over given to down XX shut we for ship relatively was much military. last so, the going days That able even or to haven’t been but

what anticipate get for But $XX getting to So, year. we up am million that we I runrate. the not back sure to the our business of kind

Jonathan Komp

of you think Could year how but know plan you just do receipts business, on to the And brand still Understood. orders, that are play terms here you out in the – end you maybe I do about expect reduction in in how that you the for following inventory comment upon inventory. wholesales about Okay. you planning the receiving? and the highlighted when

Tom Robertson

Yes.

orders right as obviously, or about, we talked in approximately either delayed we’ve cancelled So, million $XX now.

We are the situation. to monitor continuing

having are We weekly updates.

facilities think as year, I having own we flexibility. that what everybody kind now is gives three that right like, next it by I mean, we look trouble of does us applying think, our forecasting given manufacturing the are quarters more

at Rico have lead out Dominican Asia. Puerto of We the shorter times and than

that to Jason so products. we advantage as to our XX% talked well, so, our are about and products core of going are as play And

be and through if So, move get we'll we inventory, adjust a to forward. work purchases we our little able over as that inventory

we yes, on be would are But But guess my overly as have creep guess and we demand up. aggressive it doesn’t having to doesn't inventory too are us levels concerned.

Jonathan Komp

very one me. Okay. for helpful. then That maybe looks last And

thinking more of the cost business, needed know out mentioned Just operating additional you about I cost. the if side flexibility to some take

operating But even of might and a scenarios side? to you the the what planning cost any considering how how that are that frame the be inform up or way you types are range you sales of on from business doing perspective

Tom Robertson

Yes.

of my two three figure kind now in same it’s out what’s – complicated that’s quarters. to we to happen trying a all over I question the going the you So, Jon, boat give next are cents because but will pretty

think our right, weren’t sales is really of that been, current as the think any we'll Amazon the kind biggest retail doing meaningful we decline business until our retail of our environment quarter wholesale we third year. last you see about, business, But, we business talked this about in

there. are increases continuing we see to So,

As momentum more our to is about in growing, e-commerce there that is retail business category we which that going be biggest our that our believe is again Lehigh And demand. our Jason with then talked we pent-up hope segment, space continues.

are of happening. bit on bit fitting little We the can that because give a feel clarity scheduling kind of a better little and more that that

get flows those to last the that our up, So, margin be military from one obviously, standpoint, the gross as as with highest retail a are sales down, the through being the those with income way statement, sales going margin then with being we area. gross

inventory XX% through talked think last a a was now this we inventory, that seen bleed business, to our that going with we’ve while – are out bleed tariff the about little three we call, see as And the first through that we incremental going . in year. through of QX how worked sales wholesale decline may the we'll little bit quarters through longer the QX to But work we the and

expense the increases by from retail about be I even operating standpoint, we we'll an changes being those think making standpoint. will we talked From it dollar don't said, earlier and significant a savings the that That segment. on call, are our see offset up in

pairs operating but And and different expenses associated we talked and shipping boots marketplaces time. selling the increase freight associated with and on in so, significant a cost two the boots with at selling one

quite continues while think So, certainly increases and our kind see little and towards bit. see wholesales we’ll we’d in little those second sales deleverage don't bit a us struggle a dollar third standpoint, Hopefully, I from the to see here as of expense recover nicely we'll in quarter. fourth SG&A quarter

Jason Brooks

the are we we Lehigh as I communicated when going experience, a focused back with week kind standpoint, actually some have we to us up open rolling iFittings opening the is up next this – there. we have, Texas week, where are in or to on And accounts expect there from really field have this is also, staying two gone force states get on think what’s sales in then hopefully I can of they they accounts things and our Jon, Yes. going through and where to dock allow and believe

And not are sales communicate I it forces and anticipating with have canceled And that cancelled. how of fact shows this thing been happen, to just so, still see will that be make that them interesting we been will kind that think be to then, the that there have the changes. able

SG&A additional savings there. So there could some be

made not have cancel. we decision that to But

know. to waiting those We out are us and for them roll still let

So some the we we might of of think - still then, be and there walk kind there through savings as rest well year. the

Tom Robertson

Yes.

think, put I positive of of just the that’s a on stuff here. kind some happening Jon, spend little

our is to consumers think, going I how this out trying we to change forward. moving figure are

more And we websites, the e-commerce better. right, consumers through going so, our the get

it our have up then, shoe with And is solution. contact also particularly no or safety business, to hands-off Lehigh set a

growth seeing momentum we this as they as habits what forward. consumers or about to an excited and buying going hope may change their continue are are we at momentum we catch so, Lehigh this that from move And can we account standpoint keep

Jonathan Komp

last Okay. And just follow-up.

profit I'm modeling the you I a the quarter, from operating think might you'll feel negative about make impact thinking unreasonable, Just and not second and presuming I of it’s just more think that revenue want have going on to quarter? what’s sure

Tom Robertson

right. really quarter, going through our certainly second not to I am I ready be that mean, point. that is toughest this to talk at quarter think I

variables shutdown of working that and And through so, today. we then is a lot are that manufacturing in there about and

So, I’d rather not comment.

Jonathan Komp

Thanks all the for Understood. questions. taking Okay.

Tom Robertson

Yes. Thanks, Jon.

Jason Brooks

Thanks, Jon.

Operator

And that conclude things like Mr. answer or back gentlemen, and would Brooks to for today’s with that, question any does turn I ladies additional to session. and comments. closing

Jason Brooks

much very everybody. much. tirelessly And the have exceptional safe look the this United very through you worked in getting an a the we thank to field I entire place. thank again job to Rocky on. you people and that this Thank the situation want Great. team. I and to Thank done keep forward past to They moving want States help have

Operator

does that And participation. thank ladies you call. today’s and for with that, your conclude We gentlemen,

may now disconnect. You

Rocky Brands (RCKY) 28 Apr 202020 Q1 Earnings call transcript