Rocky Brands booked a net income of $0.5 million in the first quarter, reversing a loss of $0.6 million registered a year earlier despite a decline in revenues thanks to a sharp improvement in gross margins. The profit is the first recorded in the opening quarter in three years.
Revenues slipped by 7 percent to $52.3 million from reduced military and retail sales. The military segment plunged to $0.8 million from $5.2 million and retail sales fell by 9 percent to $11.7 million as a result of the ongoing transition to more internet-driven transactions and the removal of some Lehigh mobile stores to cut costs. Wholesale revenues increased by 5 percent to $39.8 million, primarily driven by growth in company-owned work and hunting brands.
The gross margin improved to 36.8 percent from to 33.4 percent the previous year, primarily due to the decrease in military sales, which carry a lower gross margin than the retail and wholesale businesses as well as higher average selling prices. The group also benefited from a higher sales mix of company-owned brands, which carry higher gross margins than licensed brands.
The company said that consumer demand for its new product lines has been very positive, and helped to partially offset the sales decline in the military segment and replace the Dickies licensed business, which ceased at the end of 2010. It anticipates that the combination of higher margin sales, an improved operating platform and significantly lower interest expense will continue to fuel improved year-over-year earnings during the remaining quarters of 2011.
In the quarter, interest expenses fell to $0.2 million from $1.6 million a year earlier due to reduced borrowings and lower interest rates as the result of the new $70 million revolving credit facility signed in October 2010.
Financial analysts forecast the group’s full-year sales will slip to below $250 million from $252.8 million in 2010 while the bottom line will rise to nearly $10 million from $7.7 million.