Rocky Brands Inc. is moving quickly to mitigate the impact from tariffs.
“While the situation is very fluid and the outcome of ongoing negotiations is uncertain, we moved quickly to mitigate the impact of the higher tariffs and believe we have a sound plan in place to protect our gross profit dollars under multiple scenarios,” Jason S. Brooks, chairman, president and CEO, told investors in a first quarter earnings conference call Tuesday. “Based on current tariff rates, we expect to implement price increases on the majority of our footwear styles in early June and will maintain flexibility to adjust prices accordingly based on any future changes as they are announced.”
He said the company is also “accelerating” its efforts to reduce the amount of products sourced from China. “This includes more footwear from partners in Vietnam, Cambodia, India, and as well, shifting production to our manufacturing facilities in the Dominican Republic and Puerto Rico,” Brooks said.
As for the higher prices and impact on consumer spending, Brooks said: “While we anticipate that higher prices will put some pressure on the consumer demand, we believe the strength of our brands and the functionality of our products, along with our diversified sourcing structure, has us well positioned to navigate [the] current situation and allow us to achieve our financial targets for the year.”
Brooks said the company “hasn’t seen anything crazy from our retail partners” regarding possible price increases, and he said that while odd, “the consumer doesn’t seem to be freaking out about this right now.”
Thomas D. Robertson, chief operating and chief financial officer, said on the call that the company has about six or seven month, on average, of products to sell through in 2025.
“We will be able to get through the majority of this year without feeling a lot of the pain from the tariffs yet. And it’s also going to give us ample time to transition product out of China and into Vietnam, India, Cambodia, and then also to transition to our own manufacturing facilities in Dominican Republic and Puerto Rico,” he said.
Robertson said the total volume out of China is expected to be “just less than 20 percent by the end of this year,” clarifying that some of the product lines from China will be leveraged for shipment to Rocky’s international operations.
He also said that the company isn’t prepared to share information about the price increases, although there’s been “a lot of analysis on it,” since it is still waiting to see what other actions might occur this week in regarding to China tariffs. “So, we certainly welcome a reduction in the Chinese tariffs, but we’ll be announcing a price increase here — regardless of any changes with the Chinese tariffs over the next week or two — to go into effect in June,” Robertson said.
He added that the price increases are aimed at preserving gross profit dollars, and the plan is to cost average inventory on hand with inventory that will be coming in at a higher tariff, and take into account sourcing and manufacturing changes. That should result in a price increase “that’s going to not slowdown retail very much,” he said.
Robertson also said the company is monitoring what its peers are doing, but said it seems many are waiting to see what happens with tariffs and that many, “including ourselves in some cases, [have] paused inventory coming from China.”
Robertson also said the company is “trying to speculate” about whether there will be a scarcity of product on the shelves later this year when less inventory is flowing at a time when it normally builds inventory for fall and for holiday. And while he said it will be interesting to see how that plays out, Robertson said its facility in the Dominican Republic, where it has been making boots for over 40 years, will allow it to ramp production there.
Net income for the first quarter ended March 31 rose 93.8 percent to $4.9 million, or 66 cents a diluted share, from $2.6 million, or 34 cents, in the same year-ago period. On an adjusted basis, net income was $5.5 million, or 73 cents a diluted share, versus $3.1 million, or 41 cents, a year ago. Net sales were up 1 percent to $114.1 million from $112.9 million.
Rocky’s brands include the Western boot brand Durango, as well as well as a number of rugged, workwear boot brands that include Rocky, Georgia Boot The Original Muck Boot Co., Xtratuf, Ranger, Lehigh, Shoe Angel, and Slipgrips.
Describing 2024 as “exceptional” for the Durango brand, Brooks said the sell-in to wholesale moderated in the first quarter due in part to difficult comparisons and timing shifts, including some first quarter orders being delivered early in late 2024. “We did see some underlying strength, particularly online and with our at-once business, which was positive for the quarter,” the CEO said, adding that “large volume orders in the back half of 2025” are expected as retailers optimize their inventory levels.
Brooks said the longer winter season provided extended opportunities for the sale of insulated boots. The winter weather also helped its Muck brand, which saw an uptick in the brand’s performance, with the CEO citing a double-digit increase in the quarter in its women’s business.
The company said gross margin rose 210 basis points to 41.2 percent of net sales versus 39.1 percent a year ago. It noted that inventories rose 6.3 percent at quarter-end, while debt was down 17.5 percent from year-ago levels. Brooks said the company’s refinancing in April last year resulted in a “significant reduction in interest expense” as the company continues to pay down its debt.
