Rocky Brands (RCKY) earnings release for the 3rd quarter of their 2021 fiscal year
Category: Rocky Brands (RCKY)
Date: 4 November 2021 Stock Price of Rocky Brands (RCKY): $42.81 Market Capital of Rocky Brands (RCKY): $312 million We take a look at the 3rd quarter earnings report of their 2021 fiscal year of Rocky Brands, a designer and manufacturer of footwear and apparel under brands such as Rocky, Durango and Georgia Boot. For the quarter the group reported net sales of $125.5 million and a net loss of -$375 million.
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About Rocky Brands
Rocky Brands, Inc. is a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky®, Georgia Boot®, Durango®, Lehigh®, and the licensed brand Michelin®.
Military
While we are focused on continuing to build our wholesale and retail business, we also actively bid on footwear contracts with the U.S. military, which requires products to be made in the U.S. Our manufacturing facilities in Puerto Rico, a U.S. territory, allow us to competitively bid for such contracts. We have received an order to fulfill a contract to the U.S. Military to produce “Hot Weather” combat boots. The first year of the contract includes a minimum purchase amount of $3.0 million and a maximum of $15.0 million. Shipment of the boots began in the first quarter of 2013. The contract includes an option for four additional years with the same terms.
All of our footwear for the U.S. military is currently branded Rocky. We believe that many U.S. service men and women are active outdoor enthusiasts and may be employed in many of the work and duty markets that we target with our brands. As a result, we believe our sales to the U.S. military serve as an opportunity to reach our target demographic with high quality branded products.
Wholesale
In the U.S., we distribute Rocky, Georgia Boot, Durango and Michelin products through a wide range of wholesale distribution channels. As of December 31, 2013, our products were offered for sale at over 10,000 retail locations in the U.S. and Canada.
We sell our products to wholesale accounts in the U.S. primarily through a dedicated in-house sales team who carry our branded products exclusively, as well as independent sales representatives who carry our branded products and other non-competing products. Our sales force for Rocky is organized around major accounts, including Bass Pro Shops, Cabela’s, Dick’s Sporting Goods, Tractor Supply Company and Gander Mountain, and around our target markets: outdoor, work, duty, commercial military and western. For our Georgia Boot and Durango brands, our sales employees are organized around each brand and target a broad range of distribution channels. All of our sales people actively call on their retail customer base to educate them on the quality, comfort, technical features and breadth of our product lines and to ensure that our products are displayed effectively at retail locations.
Our wholesale distribution channels vary by market:
Military
While we are focused on continuing to build our wholesale and retail business, we also actively bid on footwear contracts with the U.S. military, which requires products to be made in the U.S. Our manufacturing facilities in Puerto Rico, a U.S. territory, allow us to competitively bid for such contracts. We have received an order to fulfill a contract to the U.S. Military to produce “Hot Weather” combat boots. The first year of the contract includes a minimum purchase amount of $3.0 million and a maximum of $15.0 million. Shipment of the boots began in the first quarter of 2013. The contract includes an option for four additional years with the same terms.
All of our footwear for the U.S. military is currently branded Rocky. We believe that many U.S. service men and women are active outdoor enthusiasts and may be employed in many of the work and duty markets that we target with our brands. As a result, we believe our sales to the U.S. military serve as an opportunity to reach our target demographic with high quality branded products.
Wholesale
In the U.S., we distribute Rocky, Georgia Boot, Durango and Michelin products through a wide range of wholesale distribution channels. As of December 31, 2013, our products were offered for sale at over 10,000 retail locations in the U.S. and Canada.
We sell our products to wholesale accounts in the U.S. primarily through a dedicated in-house sales team who carry our branded products exclusively, as well as independent sales representatives who carry our branded products and other non-competing products. Our sales force for Rocky is organized around major accounts, including Bass Pro Shops, Cabela’s, Dick’s Sporting Goods, Tractor Supply Company and Gander Mountain, and around our target markets: outdoor, work, duty, commercial military and western. For our Georgia Boot and Durango brands, our sales employees are organized around each brand and target a broad range of distribution channels. All of our sales people actively call on their retail customer base to educate them on the quality, comfort, technical features and breadth of our product lines and to ensure that our products are displayed effectively at retail locations.
Our wholesale distribution channels vary by market:
- Our outdoor products are sold primarily through sporting goods stores, outdoor specialty stores, catalogs and mass merchants.
- Our work-related products are sold primarily through retail uniform stores, catalogs, farm store chains, specialty safety stores, independent shoe stores and hardware stores.
- Our duty products are sold primarily through uniform stores and catalog specialists.
- Our commercial military products are sold primarily through base exchanges such as AAFES and consumer websites.
- Our western products are sold through western stores, work specialty stores, specialty farm and ranch stores and more recently, fashion oriented footwear retailers.
- Our lifestyle products are sold primarily through fashion oriented footwear retailers.
Overview of Rocky Brands' 3rd quarter 2021 earnings report
Third Quarter 2021 Overview
- Net sales increased 61.4% to $125.5 million
- Wholesale segment sales increased 70.3%; Retail segment sales increased 35.3%
- Net loss of $(0.4) million, or $(0.05) per diluted share
- Adjusted net income of $2.5 million, or $0.34 per diluted share
Rocky Brands (RCKY) management commentary on their 3rd quarter 2021 results
NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its third quarter ended September 30, 2021 which reflect the impact from temporary fulfillment challenges in the Company’s Ohio distribution center.
“We continued to experience robust demand for our portfolio of leading brands during the third quarter,” said Jason Brooks, Chairman, President and Chief Executive Officer. “After moving the recently acquired Boston Group’s* inventory to our Ohio distribution center in mid-August, and receiving record inbound supply in preparation for a strong finish to the year, we encountered unanticipated fulfillment challenges that are temporarily hindering our ability to deliver a portion of orders on time. We are making good progress towards regaining the full efficiency of our Ohio distribution center, which along with our new distribution center in Reno, Nevada that went live in early October, has improved our shipping capacity ahead of the holiday season.”
“We continued to experience robust demand for our portfolio of leading brands during the third quarter,” said Jason Brooks, Chairman, President and Chief Executive Officer. “After moving the recently acquired Boston Group’s* inventory to our Ohio distribution center in mid-August, and receiving record inbound supply in preparation for a strong finish to the year, we encountered unanticipated fulfillment challenges that are temporarily hindering our ability to deliver a portion of orders on time. We are making good progress towards regaining the full efficiency of our Ohio distribution center, which along with our new distribution center in Reno, Nevada that went live in early October, has improved our shipping capacity ahead of the holiday season.”
“While we are disappointed that our near-term growth potential is being limited by fulfillment headwinds, I am confident we’re positioning the business for further market share gains and increased profitability even as the operating environment remains volatile. Our enviable inventory position and relative insulation from industry-impacting global supply chain issues enabled through our Caribbean-based manufacturing facilities, provide key competitive advantages that are driving shelf space gains and new market opportunities. We are excited to complete the integration of the Boston Group so we can turn our full attention to unlocking the earning power of our combined organizations.”
Balance Sheet Review
Cash and cash equivalents were $12.9 million at September 30, 2021 compared to $19.9 million on the same date a year ago. The change in cash and cash equivalents was driven primarily by the use of cash to fund a portion of the Boston Group acquisition. Total debt at September 30, 2021 was $238.8 million consisting of $130 million senior term loan and borrowings under the Company's senior secured asset-backed credit facility.
Inventory at September 30, 2021 increased to $202.2 million compared to $80.7 million on the same date a year ago. The $121.5 million increase includes approximately $90.9 million in Boston Group inventory and approximately $31 million from orders that did not ship on schedule during the third quarter of 2021.
Balance Sheet Review
Cash and cash equivalents were $12.9 million at September 30, 2021 compared to $19.9 million on the same date a year ago. The change in cash and cash equivalents was driven primarily by the use of cash to fund a portion of the Boston Group acquisition. Total debt at September 30, 2021 was $238.8 million consisting of $130 million senior term loan and borrowings under the Company's senior secured asset-backed credit facility.
Inventory at September 30, 2021 increased to $202.2 million compared to $80.7 million on the same date a year ago. The $121.5 million increase includes approximately $90.9 million in Boston Group inventory and approximately $31 million from orders that did not ship on schedule during the third quarter of 2021.
Rocky Brands (RCKY) stock price history over the last 5 years
The image below shows the stock price history of Rocky Brands over the last 5 years. And it's been a pretty good time for Rocky Brands stockholders. Over the last 5 years the stock of Rocky Brands increased by 302%. No investor would say no to those type of returns.
The stock of Rocky Brands is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the momentum and sentiment of Rocky Brands stock is very positive at this point in time.
The stock of Rocky Brands is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the momentum and sentiment of Rocky Brands stock is very positive at this point in time.
Rocky Brands (RCKY) vs Nike (NKE) over the last 5 years
The image below shows the stock price performance of Rocky Brands (RCKY) and Nike (NKE) over the last 5 years. From the image below it is clear that the stock of Rocky Brands and Nike has provided very similar returns over the last 5 years. Over the 5 year period the two stocks provided the following returns:
Rocky Brands has easily outperformed the stock of Nike over the last 5 years.
- Rocky Brands (RCKY): 302%
- Nike (NKE): 245%
Rocky Brands has easily outperformed the stock of Nike over the last 5 years.
Rocky Brands (RCKY) vs Nike (NKE) as obtained from Genuine Impact App
The screenshot below shows the comparison between Rocky Brands and Nike using the Genuine Impact App. Genuine Impact ranks and scores over 7000 stocks on a various metrics and ranks them accordingly compared to the rest of the stocks in their universe of stocks they look at. Based on their rankings, based on overall quality Rocky Brands comes in in 417th spot while Nike comes in in 321st place. However based on value and current momentum of the two stocks Rocky Brands edges out Nike in both of these. So a close battle but based on the top 3 metrics on Genuine Impact Rocky Brands comes out on top.
Rocky Brands (RCKY) latest stock valuation
So what is Rocky Brands stock worth based on the release of their latest earnings report provided? Based on Rocky Brands latest earnings report our valuation models provide a target price (full value price) for Rocky Brands stock at $29.70 a stock. We therefore believe that the stock of Rocky Brands is undervalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $29.7. Therefore we believe a good entry point into Rocky Brands stock is at $26.80 or below. We expect the stock of Rocky Brands to kick up from current levels in coming weeks and months to levels closer to our target (full value) price.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $29.7. Therefore we believe a good entry point into Rocky Brands stock is at $26.80 or below. We expect the stock of Rocky Brands to kick up from current levels in coming weeks and months to levels closer to our target (full value) price.
Next earnings release date for Rocky Brands
It is expected that Rocky Brands (RCKY) 3rd quarter 2021 earnings report will be released towards the end of February 2022