Rocky Brands Q3 Earnings Call Highlights

Key Points

• Rocky Brands exceeded expectations in Q3 fiscal 2026, with sales up 13.3% year over year to $138.8 million and adjusted EPS rising to $1.76 from $1.03. Growth was broad-based across wholesale, retail and brands including Durango, Muck and XTRATUF.
• Gross margin improved substantially, supported by stronger full-price selling, direct-to-consumer growth and approximately $6 million in tariff-related and free-trade-zone benefits. Excluding those benefits, gross margin was 40.7%, while retail and contract manufacturing margins expanded.
• The company raised its fiscal 2026 outlook, now projecting revenue growth of approximately 10.5% and reported EPS of about $5.30. Rocky expects continued digital-marketing investment and is evaluating pricing actions to offset product, oil and freight-cost pressures.

Rocky Brands NASDAQ: RCKY reported third-quarter fiscal 2026 results that exceeded its expectations, with sales rising 13.3% year over year to $138.8 million as growth accelerated across wholesale, retail and several footwear brands.

President and Chief Executive Officer Jason Brooks said the company recorded its second consecutive quarter of double-digit revenue growth, following a 12% increase in the second quarter. Wholesale sales, its largest segment, increased 11.8% to $99.6 million, while retail sales rose 20% to $35.4 million. Contract manufacturing sales were essentially flat at $3.8 million.

Brooks said demand was broad-based, with Durango, Muck and XTRATUF each delivering double-digit gains. Lehigh CustomFit and the company’s branded e-commerce sites also supported retail growth. Rocky Brands’ direct-to-consumer websites grew by roughly 30%, according to Chief Operating and Financial Officer Tom Robertson, aided by increased digital advertising.

Profitability Improved, Including Tariff Benefits

Third-quarter gross profit increased to $62.5 million, or 45% of sales, from $49.3 million, or 40.2% of sales, a year earlier. The reported margin included approximately $2.5 million in IEEPA tariff refunds and $3.5 million from sales of inventory held in a free-trade zone that did not incur incremental tariffs.

Excluding those tariff-related and free-trade-zone benefits, gross margin was 40.7%. Brooks said that underlying gross margin improved by approximately 200 basis points from the second quarter, reaching the low-40% range. Robertson attributed the third-quarter performance in part to stronger full-price selling, particularly in wholesale, and a greater-than-expected mix of direct-to-consumer sales.

Segment margins excluding current-year net tariff benefits included:

• Wholesale margin of 39.2%, down 90 basis points from 40.1%, primarily due to product and brand mix.
• Retail margin of 48.2%, up 330 basis points from 44.9%.
• Contract manufacturing margin of 9.9%, up 300 basis points.

Operating expenses increased to $44.3 million, or 31.9% of sales, from $37.5 million, or 30.6% of sales, in the prior-year period. The company cited higher outbound logistics expenses tied to fuel costs, a greater retail-sales mix, higher digital advertising spending and increased performance-based compensation.

GAAP net income rose to $12.8 million, or $1.69 per diluted share, from $7.2 million, or $0.96 per diluted share, a year earlier. Adjusted net income was $13.4 million, or $1.76 per diluted share, compared with $7.8 million, or $1.03 per diluted share, in the prior-year quarter.

Brand Performance Led by Durango, Muck and XTRATUF

XTRATUF posted another quarter of double-digit growth, supported by direct-to-consumer sales and high-single-digit wholesale growth. Brooks said wholesale growth moderated partly because of shipment timing and the company’s decision to stop selling to certain international distributors that had diverted merchandise to U.S. online marketplaces. The company said spring and summer 2027 bookings were strong, including orders for a new sandal program.

Muck delivered what Brooks called its strongest quarter of the year. New Xplorer, Outmax and Woodland Pro collections contributed to sales, while Arctic collection inventory reached retailers earlier in advance of winter. Women’s products remained the fastest-growing category, with demand led by Originals, Muckster II and Chicken Boot styles.

Durango had an “exceptional quarter,” according to Brooks, as new product shipments, store-count additions, fresh assortments and larger orders from western retailers drove growth. The company said it added doors with Hispanic retailers, particularly in the Southwest, while spring 2027 bookings increased on demand for Workhorse Light, Rebel USA and Cattleman products.

Georgia Boot sales declined from a year ago due to timing and difficult comparisons with large prior-year bulk orders. Brooks also pointed to cautious buying among independent retailers amid inflation and higher fuel costs. However, GeorgiaBoot.com posted its second consecutive quarter of double-digit growth, and expanded distribution for Wedge and Carbon Flex Wedge products supported key accounts.

Rocky work, outdoor and western businesses collectively grew low single digits, driven by direct-to-consumer sales. The Ride LTE collection helped improve western-category performance, while RockyBoots.com grew at a low-double-digit rate.

Inventory, Digital Spending and Outlook

At the end of the quarter, inventory was $189.7 million, down 2% from a year earlier but up 4.7% from year-end 2025. Robertson said unit pairs in inventory were higher than a year earlier, though the company could use more inventory in selected categories and continues to use expedited shipping to meet fourth-quarter demand. Brooks identified commercial military products as one area where inventory availability had been constrained, though he said conditions have improved.

Commercial military sales fell below both the prior year and plan because of temporary raw-material shortages and a softer market as government spending shifted toward technical hardware and other operational needs. Rocky Brands said it secured U.S. Air Force and international government bids expected to ship in early 2027. Public-service sales increased modestly, aided by recertified fire boots and stronger U.S. Postal Service product inventory.

The company increased digital marketing spending by approximately $1 million to $2 million during the quarter, mostly as incremental spending, Robertson said. The investment is being managed using customer-acquisition-cost and return-on-ad-spend metrics and is expected to rise further in the fourth quarter, when e-commerce activity is seasonally stronger.

Rocky Brands raised its fiscal 2026 outlook, now expecting revenue to increase approximately 10.5% over 2025, compared with prior guidance for an 8.5% gain. The forecast implies roughly 8% sales growth in the fourth quarter, Robertson said. The company expects reported earnings per share of approximately $5.30, up from prior guidance of about $5.00, while adjusted earnings per share are expected to remain around $4.00.

For 2026, Rocky Brands expects normalized gross margin of approximately 41% after excluding the net effects of tariffs and the free-trade-zone benefit. Robertson said the company continues to face product-cost, oil-price and freight pressures and is evaluating pricing actions for 2027, while maintaining a long-term gross-margin target of about 40%.

About Rocky Brands (NASDAQ:RCKY)

Rocky Brands, Inc is an American footwear and apparel company headquartered in Nelsonville, Ohio. Founded in 1932, the company develops, manufactures, and markets work, outdoor, western, hunting, and military footwear, along with related apparel and accessories.

Its brand portfolio includes Rocky, Georgia Boot, Durango, and Lehigh Safety Shoe. Products are designed for applications such as construction, industrial work, farming, law enforcement, outdoor recreation, hunting, and everyday wear.

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