Q1 2025 Rocky Brands Inc Earnings Call
Ladies and gentlemen, greetings and welcome to the Rocky Brands, Inc. First quarter fiscal 'twenty 25 earnings conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host Cody Microlecithal of ICR. Please go ahead.
Speaker Change: Thank you and thanks to everyone joining us today.
Speaker Change: Before we begin please note that today's session, including the Q&A period may contain forward looking statements as defined by the private Securities Litigation Reform Act of 1995.
Speaker Change: Such statements are based on information and assumptions available at this time.
Speaker Change: Subject to changes risks and uncertainties, which may cause actual results to differ materially.
Speaker Change: We assume no obligation to update such statements.
Speaker Change: For a complete discussion of the risks and uncertainties. Please refer to today's press release and our reports filed with the Securities and Exchange Commission, including our 10-K for the year ended December 31 2024.
Speaker Change: And I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky brands.
Speaker Change: Thank you Cody with me on today's call is Tom Robertson, our chief operating and Chief Financial Officer.
Speaker Change: After our prepared remarks, we will be happy to take questions.
Speaker Change: It has been a good start to 2025, despite growing macroeconomic uncertainty.
Speaker Change: During the first quarter, we experienced healthy demand within our brand portfolio and throughout our distribution channels led by a 20% top line growth in our retail segment.
Speaker Change: Demand was especially strong for our rubber boot business, which includes both extra tough and mark the extra tough brand has been gaining momentum for several quarters with sell through online and at wholesale accelerating in Q1, as we increased our inventory position in key styles.
Speaker Change: With better full price selling overall in retail increasing meaningfully as a percentage of the total sales we achieved record first quarter gross margins and our second highest gross margin. However, only behind the fourth quarter of last year.
Speaker Change: Bind with this significant reduction in interest expense following our refinancing in April of last year and continued debt pay down we increased adjusted net income 78% year over year.
Since our last earnings call in February the World. We are operating in has become much more dynamic following higher tariffs imposed by the U S.
Speaker Change: All trade partners, particularly China.
Speaker Change: While the situation is very fluid and the outcome of ongoing negotiations is uncertain. We've 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.
Speaker Change: Based on current tariff rates, we expect to implement price increases on the majority of our footwear styles in early June and we'll maintain flexibility to adjust prices accordingly based on any future changes as they are announced.
Speaker Change: We are also accelerating our efforts to reduce the amount of products, we source from China.
Speaker Change: This includes procuring more footwear from partners in Vietnam, Cambodia, India, and as well as shifting production to our manufacturing facilities in the Dominican Republic, and Puerto Rico.
Speaker Change: 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 current situation and allow us to achieve our financial.
Speaker Change: Target for the year.
Speaker Change: Before I hand, the call over to Tom for a more detailed look at the financials I'll take a few moments to walk through our fourth quarter brand and channel performance.
Speaker Change: Starting with extra tough.
Speaker Change: The brand continues its recent momentum and delivered another exceptional quarter with double digit growth in Q1.
Speaker Change: Importantly, we have seen the brand continued to expand its reach into new regions and niches growing in popularity across the inland U S and the new demographics outside of its core male consumer in fact at our spring 'twenty five deliveries are most <unk>.
Speaker Change: The other new styles or the womens Dr Camo, and I've recover colored ankle deck boots the.
Speaker Change: The brand performed strongly across key accounts, including sporting goods retailers fishing shops, and even western stores with independent customers keeping pace as well many retailers saw excellent sell through on both proven classics and new colors, demonstrating strong retail demand for the <unk>.
Speaker Change: Dan.
Speaker Change: We also successfully launched extra top key sporting retailer in Q1, leading to added styles replenishment orders endure expansions.
Speaker Change: Bookings are up approximately 80% versus last year and as we move further into the spring season, we have many exciting launches ahead, including a summer delivery of the new Guy Harvey styles, including our first Guy Harvey Kid ankle that food as well as well as in.
Speaker Change: Collaboration with the U S rowing team and online exclusive with pro team or Andrew Cotton.
Speaker Change: And the launch of our partnership as an official boot sponsor of the sport fishing championship.
Speaker Change: Overall, there is a lot to be excited about with extra tough in the months to come.
Mark: Mark also started 2025 with a better than expected growth.
Mark: Better winter weather in much of the United States compared to the warm dry patterns of the previous two years led to a significant uptick in the brand's performance. Our women's business was a surprise standout delivering a double digit increase in the period. Additionally, improved inventory positions in key countries.
Mark: <unk> to the successful quarter.
Mark: From a marketing standpoint, our enhanced digital advertising continued to deliver strong results with a focused approach on the work and utility category during cold weather periods.
Mark: February we took steps to consolidate our digital media buying allowing for more nimble allocation to capitalize the best ROI.
Mark: Coming off an exceptional 2020 for the Durango brand sell into wholesale moderated in the first quarter due in part to difficult comparisons and timing shifts as some Q1s orders were delivered early in late 2024.
Mark: That said, we did see some underlying strength, particularly online and with our at once business, which was positive in the quarter and we anticipate large volume orders in the back half of 2025 as retailers optimize their inventory levels importantly.
Mark: Importantly, our inventory position in top styles remained strong.
Mark: Heading into the second quarter.
Mark: While January and February are a positive for Georgia Boot March was notably softer is the field customer base slowed orders due to the economic uncertainty. Additionally, we saw some sizable orders come in later this year falling into Q2, while we also did not anniversary some.
Mark: Large orders from 2020 for many of which were driven by retailers resetting Assortments that are now established.
Mark: Despite the sluggish orders from our retail partners recent.
Mark: Introductions like the Romeo Super Light continued to perform well to the point that we are chasing inventory in the first quarter.
Mark: Other new offerings that are focused on hitting key price points, while maintaining comfort and quality have resonated with retailers and consumers alike.
Mark: Continuing to sell through and recently being added at several major retailers for later this year.
Mark: Turning to our Rocky brand group, both of our work and outdoor categories showed increased compared to last year with rocky work delivering the strongest performance.
Mark: Workstyle saw solid expansion with key national safety shoe distributor partners and regional and local shoe distributors in the period that drove its success.
Mark: Rocky outdoor we were pleased to see a return to growth after a string of consecutive difficult quarters. The brand delivered single digit increase over last year through solid distribution with E Commerce partners national chains, and independent retailers across the country.
Mark: A renewed snake boot program with a prominent national retailer and strong sales on our e-commerce site contribute to the increase Additionally.
Mark: Additionally, a longer winter season in most of the country provided extended opportunities with insulated boots selling.
Mark: Which has not been seen the case in recent seasons.
Mark: New additions to our growing rugged casual business contributed to the solid quarter as well.
Mark: Well, while rocky Western sales were down in Q1, it was largely to a touch comparison from elevated off price sales of discontinued product in Q1 last year that did not anniversary in 2025.
Mark: Particularly offset this headwind was the introduction of our western boots to key farm and ranch multi store chain in the northwest.
Mark: Along with solid sales with our E Commerce drop ship partners.
Mark: Lastly in wholesale our commercial military and duty segment was down in Q1 largely in line with our projections. The expected decrease was due to the benefit of the year ago from a sizable commercial military blanket purchase agreement that elevated early 2024 sales on <unk>.
Mark: Of this the X X.
Mark: Order implemented by the department of government efficiency in February freezing all government purchasing cards was also a headwind in the first quarter.
Mark: Shifting to retail our <unk> business had a terrific quarter with sales increasing high teens, marking the third consecutive quarter of double digit gains.
Mark: As the realignment of our sales team reaches its one year anniversary and new processes are firmly in place the business is firing on all cylinders.
Mark: Customer spending continues to be strong with improved subsidy utilization and increase in average subsidy dollars year over year.
Mark: New customer acquisition remains robust with the addition of 190 new accounts this quarter.
With no indication of a market slowdown to date.
Mark: Our direct to consumer business, which consist of our own branded websites and leading third party marketplaces grew at an even faster pace than Lehigh led by marketplace volumes as clear through a good deal discontinued inventory in the quarter.
Mark: Looking ahead, we acknowledge that there is a higher degree of uncertainty over the remainder of the year that we will outline our guidance in February.
Mark: Our confidence in maintaining our outlook stems from our better than expected first quarter performance. The positive effect recent self has had on our future bookings and our ability to mitigate the impact of tariffs through recent inventory investments.
Mark: Pricing actions and our diversified sourcing structure.
Mark: I look forward to updating you on our progress on our second quarter call in July.
Mark: I'll now call I'll now turn the call over to Tom.
Tom Robertson: Thanks, Jason.
Can one Jason sentiment I am very pleased with our start to 2025, especially considering the general uncertainty that has been dominating the headlines.
Tom Robertson: Diversity of our brand portfolio and the appeal of our functional accessibly priced footwear has allowed us to have definitely navigate the current retail environment.
Reported net sales for the first quarter increased one 1% year over year to $114 $1 million, which was slightly ahead of our expectations by segment wholesale sales were down $5 million or six 3% to $74 $8 million with $3 million of the decrease.
Coming from the planned reduction in commercial military sales.
Tom Robertson: Retail sales increased 25% to $36 $6 million in contract manufacturing sales were $2 6 million.
Tom Robertson: Turning to gross profit for the first quarter gross profit was $47 million or <unk> 41, 2% of sales, which is the highest gross margin we've ever reported in Q1 compared to $44 1 million or 39, 1% of net sales in the same period last year.
Tom Robertson: The 210 basis point increase was driven by higher wholesale margins that resulted from better full price selling and favorable product mix combined with a higher percentage of retail sales, which carry higher gross margins than the wholesale and contract manufacturing segments.
Tom Robertson: Reported gross margins by segment.
Tom Robertson: As follows wholesale up 390 basis points to 43% retail down 300 basis points to 45, 7% and contract manufacturing margins were five 8%.
Tom Robertson: Operating expenses were $38 3 million or 33, 6% of net sales in the first quarter of 2025 compared to $36 2 million or.
Tom Robertson: For 32% of net sales last year excluding.
Tom Robertson: Excluding acquisition related amortization in the first quarter of this year and last year adjusted operating expenses were $37 $6 million and $35 5 million, respectively. In Q1 of 2025 and Q1 of 2024.
Tom Robertson: The increase in operating expenses was driven primarily by higher selling and outbound logistics logistics costs associated with the increase in our direct to consumer sales compared with the year ago period.
Tom Robertson: Income from operations was $8 7 million or seven 6% of net sales compared to $8 million were seven 1% of net sales in the year ago period.
Tom Robertson: Adjusted operating income was $9 4 million or eight 2% of net sales compared to adjusted operating income of $8 7 million or seven 7% of net sales a year ago.
Tom Robertson: For the first quarter of this year interest expense was $2 $4 million compared with $4 $5 million in the year ago period. The decrease reflects lower interest rates as a result of the debt refinancing we completed in April 2024, as well as lower debt levels.
Tom Robertson: On a GAAP basis, we reported net income of $4 9 million or <unk> 66 per diluted share compared to a net income of $2 6 million or 34 cents per diluted share in the first quarter of 2024 <unk>.
Tom Robertson: Adjusted net income for the first quarter of 2020.
Tom Robertson: <unk> was $5 $5 million or <unk> 73 per diluted share compared to adjusted net income of $3 1 million or <unk> 41 per diluted share a year ago.
Tom Robertson: Turning to our balance sheet at the end of the first quarter cash and cash equivalents stood at $2 $6 million and our total debt net of unamortized debt issuance costs totaled $128 6 million a decrease of 17, 5% since March 31 last year.
Tom Robertson: Inventories at the end of the first quarter were $175 5 million up six 3% compared to $165 $1 million, a year ago and $166 7 million at the end of 2024, we purposely accelerated receipts in March due to the initial round of tariffs were announced and continue to bring product.
Tom Robertson: And early to avoid the impact of higher tariffs announced in April and therefore, we expect.
Tom Robertson: To increase borrowings under our credit facility in support of these investments in Q2 before starting to decline in the second half of the year.
Tom Robertson: With respect to our outlook based on our first quarter performance and inclusive of the tariffs that have been announced this year through today, we are reiterating our prior full year 2025 guidance revenue is still expected to increase in the low single digit range over 2024 levels with the price increases were implemented in Q2 to offset.
Tom Robertson: Lower volumes as a result of the higher prices.
Tom Robertson: As a reminder, our original guidance for the full year gross margins to decline modestly year over year, including a roughly 110 basis points of headwind from the 10% increase in the Chinese tariffs announced prior to US reporting Q4 results in late February.
Tom Robertson: We are forecasting additional pressure on gross margins from the tariffs announced in March and in April but expect to hold gross profit dollars consistent with our initial outlook through the actions, we've discussed, namely increasing prices.
Tom Robertson: Rounding out our guidance SG&A is still expected to be up in dollars as an increase in our marketing spend to support growth.
Tom Robertson: Realizing higher logistics and selling costs associated with the projected increase in retail sales.
Tom Robertson: As a percentage of revenue expenses will be to last year.
Tom Robertson: Finally, we still expect 2025 EPS to be just below 2024 is adjusted EPS of $2 54.
Tom Robertson: That concludes our prepared remarks, operator, we're now ready for questions.
Tom Robertson: Yeah.
Tom Robertson: Thank you ladies.
Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question. Please press star and one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Tom Robertson: You May press star two if you'd like to remove your question from the queue.
Tom Robertson: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Janine Stichter: The first question comes from the line of Janine Stichter from <unk>. Please go ahead.
Janine Stichter: Hi, Thanks for taking my question.
Janine Stichter: Was hoping you could elaborate a bit on the guidance really impressive to see that you are able to able to reiterate the profit guidance with everything going on with tariffs maybe help us understand how much you've been able to migrate out of China, what's going on with the China shipments you had originally planned were you able to parse those it sounds like you are able to bring some in early and then maybe some more color.
Janine Stichter: On the magnitude of price increases that Youre planning. Thank you.
Speaker Change: Yeah, I'll start off and then Jason can certainly chime in I think one of the one of the things. We are recognizing is that we are in a very good inventory position and so if you think about.
Speaker Change: The investments we made in inventory at the beginning of this year and through and through March we have about six seven months on average of products to sell through this year. So we will be able to get through the majority of this year.
Speaker Change: Without feeling a lot of the pain from the tariffs yet.
Speaker Change: And it's also going to give us ample time to transition product out of China.
Speaker Change: And into into Vietnam, India Cambodia.
Speaker Change: And then also transitioning to our own manufacturing facilities, and Dominican Republic, and Puerto Rico. So we will be able to use that that inventory as a buffer.
Speaker Change: To allow us to execute in this transition.
Speaker Change: Ahead of schedule from where we originally anticipated on the last call and so as we look today, we anticipate total total volume out of China.
Speaker Change: B to B, just less than 20% by the end of this year.
And it's important to call out when we when we talk to that is that not all the product from China will be coming to the U S. Rights. So we do have an international business that were going on there we're going to leverage too.
Speaker Change: Ship product out of our Chinese facility.
Speaker Change: Through the rest of the year and.
Speaker Change: So we're going to continue to do that from a from a pricing increase we're not really prepared to share the price increase quite yet, but theres been a lot of analysis on it obviously, we are still waiting to see if there's any actions taken this week or last week.
Speaker Change: No.
Speaker Change: Mentioned by the administration around China, and a reduction there so we certainly welcome.
Speaker Change: A reduction in the Chinese tariffs, but.
Speaker Change: But we will be announcing a price increase here.
Speaker Change: Regardless of any changes of the Chinese tariffs over the next week or two to go into effect in June as Jason touched on.
Speaker Change: Yes, and then just.
Speaker Change: Kind of add on there I think you had also asked about what we're doing right now out of China and in some cases, we have paused.
Speaker Change: Some shipments but are.
Speaker Change: Are doing that very methodically and trying to understand.
Speaker Change: The needs that we have in our consumers and retailers so.
Speaker Change: There are some areas that we have paused some areas that we have slowed and then as Tom indicated we've been able to move some things around in and say well. This now is not going to come to the U S go to somewhere else in the world. So we've been able to do some of that as well.
Speaker Change: Got it that's helpful color and then maybe just sticking with the wholesale business. It sounds like based on the color. You gave you haven't really seen any meaningful change to wholesale order books. What are you hearing from your wholesale partners are just love a little bit more color about how they're thinking about the consumers ability to absorb some of these price increases and just the health of the consumer.
Speaker Change: Yes.
Speaker Change: Start this one and Tom can chime in next.
Speaker Change: No.
Speaker Change: Just to kind of backup our bookings going into Q1 were really strong. So we have a really nice.
Speaker Change: Bookings set for fall of this year in particular in an extra tough and some of the other brands all the brands did well.
Speaker Change: We haven't seen anything crazy.
Speaker Change: Our retail partners with like trying to beat a price increase or trying to understand where that is.
Speaker Change: We've had a few conversations where people are like well, maybe I'll buy in Assam Abi won't.
Speaker Change: A lot of our mom and Pops.
Speaker Change: <unk> have talked about just trying to navigate it and seeing when and where they will have to take price increases.
Speaker Change: I find it really odd, but the consumer doesn't seem to be freaking out about this right now.
Speaker Change: And.
Speaker Change: It's really interesting because it.
Speaker Change: I think everybody, including US is just kind of like okay, let's manage our business, let's get through this let's see how things kind of fall through and fall out.
Speaker Change: And make the best as best business decisions, we can with the information we have but it doesn't seem to be a panic right yet from the consumer standpoint, and therefore, our retail partners are dawn.
Speaker Change: The status quo taken advantage of some things here and there, but nothing too crazy.
Yes, I think just to add on there I think one of the things. We're monitoring obviously is what our peers are doing and so it seems like we've seen some price increases from some of our peers.
Speaker Change: But it feels like a lot of them are waiting to see what happens with the with the with tariffs on Chinese tariffs, particularly.
Speaker Change: And so we know that theres, a lot of folks including ourselves in some cases that a pause inventory coming from China, and so we're trying to speculate about whether or not there's going to be scarcity on the shelf.
Speaker Change: Later this year.
Speaker Change: As inventory is not flowing as it normally would particularly at a time when when.
Speaker Change: No.
Speaker Change: Brands like ours are building inventory for fall and for holiday, so it'll be interesting to see how that plays out.
Speaker Change: I do think that we are in a competitive advantage situation. We have our facility in the Dominican Republic, which is going to allow us to ramp production, there and important to call out that we're not starting this factory.
Speaker Change: Out of this tariff situation, we've been making boots in the Dominican Republic for over 40 years, and so we're going to continue to leverage that asset for us.
Speaker Change: This year as well as our Puerto Rican facility and Thats going to be a much more meaningful asset.
Speaker Change: Given the dynamic that's going on in the World right now.
Super helpful and definitely interesting times, thanks, a lot and best of luck.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Jonathan Komp from Baird. Please go ahead.
Jonathan Komp: Yes, hi, Thank you good afternoon, Tom just can I start with a clarification.
Speaker Change: Might have misheard the guidance for the year I think you said unchanged to revenue assumption.
Lower gross margin percentage, but unchanged gross profit dollars I just want to make sure I heard that that doesn't sound like the right math for those three all of vehicle.
Speaker Change: Yes, so our plan is to implement a price increase.
Speaker Change: So we will certainly have some wins there from a revenue perspective and.
Speaker Change: And so we probably have our topline growth slightly over what we had originally guided however, we're tempering that with with the expectation that we could see some uncertainty with volume.
Speaker Change: And so from a margin perspective, our goal is to maintain those gross profit dollars.
Speaker Change: Which would result in a lower gross profit percentage.
Speaker Change: For the year.
Speaker Change: To basically get to the end goal here of maintaining our EPS guidance for the year of just under last years.
Speaker Change: Okay.
Paul: Paul Thanks for clarifying and then.
Paul: Thinking about the timing of some of the impacts.
Paul: Just specifically.
Specifically on the price increases that will you be only passing along.
Paul: Price increases that you received from from the manufacturers or is there any.
Paul: Opportunistic.
Paul: Chance to sort of front run your pricing.
Sure.
Paul: Market conditions, and even though you have some coverage of lower cost inventory.
Paul: Just wondering sort of that dynamic.
Paul: Strategically how youre planning the price increases.
Yes, so right now as we look to the price increase.
Paul: We're still trying to discern what's going to happen with tariffs in the future, but our current position is to preserve gross profit dollars. So we're doing a price increase now that basically allow us to kind of cost average inventory that we have in.
Paul: On hand already.
Paul: As well as with inventory thats going to be coming in at a higher tariff.
Paul: And as well as us executing the sourcing and manufacturing changes that we've already talked about so we're trying to do a price increase.
Paul: To not slow down retail very much remain defensive to keep ourselves space.
Paul: Yet preserve the gross profit dollars, but that makes sense.
Speaker Change: I would just add right. If you think about our brands and then where we source product from all around the world.
Speaker Change: We'd have to take tariff increases everywhere, we source from right. So like Tom said, we've been in Dominican for almost 40 years now and all of a sudden we have a 10% tariff out of the Dr. 10% nothing compared to what is being hit in China. So the idea of us looking at a holistic.
Speaker Change: Ali.
Speaker Change: Is really important for us to be able to say, okay. How do we make this work for all of the products.
Speaker Change: And really the most important product so I wouldn't say that we're being opportunistic but there might be some places that that if we think we can get a little bit better there.
Speaker Change: We might.
Speaker Change: Take that because we can't take that kind of price increase out of something that is still coming out of mainland China.
Speaker Change: Okay understood very helpful. Two more questions. If I could just one on the pricing that you are planning to communicate have you have you gone down the path have you had those conversations yet in terms of the actual communication and have you got any direct feedback from some of your customers.
Speaker Change: The pricing plans at this stage.
Speaker Change: Yes, so we have definitely talk to some key retailers.
Speaker Change: We have heard from for many that the idea around.
Speaker Change: A line item tariff.
Speaker Change: Price.
Speaker Change: Dollar charge surcharge thanks, Tom.
Speaker Change: It's really not something they would be.
Speaker Change: Excited about NII 10, I think we tend to agree with them.
Speaker Change: And then obviously trying to keep the price increases as limited as possible without slowing retail down.
And then I.
Speaker Change: Most retailers in particular are your key key retailers key account retailers. They really don't like to make these changes very often right and so if we can make one adjustment and not have to make that adjustment again for maybe another 12 months.
Speaker Change: Then than we what we want to try to do that with the volatility of the.
Speaker Change: The government right now I don't know if thats going to be possible, we'll see how things go but we're trying to we're trying to be patient and take our time and do this in the nicest cleanest way possible and I think everybody in the world kind of understands where where things are at and what's going on.
Speaker Change: So the goal would be not to be as disruptive to be as least disruptive as possible.
Speaker Change: I think as.
Speaker Change: Jason kind of called out earlier, and I think I think retailers are sophisticated out to notice that essentially everywhere got Usmc everywhere got 10%. So the cost of the cost of products has gone up 10% at first cost and so.
Speaker Change: The retailers going to anticipate a price increase I think everybody is stalling a little bit to see what happens with China.
Speaker Change: Great and then just last one and this has been very helpful.
Speaker Change: You mentioned shifting to third party capacity in Vietnam, India and Cambodia.
Speaker Change: Any just further ability to quantify how much.
Speaker Change: Capacity round numbers Youre looking by chef Dan do you have good line of sight to those commitments or are there going to be difficult to.
Speaker Change: Secure that's that much incremental capacity or some other third parties.
Speaker Change: Thanks, again, yes, great.
Speaker Change: Alright, sorry.
Speaker Change: Great. Great question, obviously, everybody is is navigating this right now so we had we had been in this process really for for some time right and we were slowly starting to move things.
Speaker Change: We have great relationships with these factories.
Speaker Change: Either in mainland China, and some of them are moving to these countries in building factories, there or are those factories have already been there and we are slowly doing it obviously under the circumstances, we decided to move a little quicker and so we believe that we've got the capacity that we need.
Speaker Change: We are being very cautious about it it's not simple just to move a boot from one factory to another it it sounds like it should be but it is complicated and the last thing we wanted to do is deliver bad products.
Speaker Change: We are moving quicker, but we are doing it methodically and I think.
Speaker Change: I think we have the capacity that we need to to manage it here in 2025, and then in 2026 and beyond continue to.
Speaker Change: Do less in China.
Speaker Change: We will always why do not always but we will we will still be doing some manufacturing in mainland China.
Speaker Change: And a lot of that product will be sold and distributed in other parts of the world versus the United States, Yes, I guess John to try to put some numbers around it.
Speaker Change: I would say we found we found the right home for about 90%, 90% to 92% of our product.
Speaker Change: And so we're working to get.
Speaker Change: Those those facilities up to speed, which would include our third party factories, but as well.
Speaker Change: The facilities that we own and so theres about 8% is still in China that we think we could potentially.
Speaker Change: Find a new home for and so we're working diligently and that number really comes down about every week or two.
Speaker Change: As we find new homes, and we come up with new ideas, but to Jason's.
Speaker Change: Point.
Speaker Change: The reality of it is where we're moving in Cambodia, and Vietnam, particularly or with partners that we've been partners with for decades.
Speaker Change: And so we have a lot of faith in our ability to execute on this on the sourcing change. It's certainly is theres going to be a 90 to 120 day timeframe, where you have ramp up time.
Speaker Change: To execute on that and this is where we hope that that inventory buffer we have.
Speaker Change: Will help get us through through that challenge.
Speaker Change: And ultimately keep boots flow into the shelves.
Speaker Change: Maybe some of our peers.
Speaker Change: We want to have the inventory position that we have or might have a harder time transitioning so to me it feels a little eerily similar to to April of 2020.
Speaker Change: When when everybody canceled <unk> at the beginning of the pandemic and we were able to demonstrate then and our goal is to demonstrate.
Speaker Change: Again here.
Speaker Change: We're able to move faster than our peers when it comes to getting inventory because we have the ability to manufacture our own products in the Dominican in Puerto Rico.
Speaker Change: And leverage our operations in China.
Speaker Change: As well.
Speaker Change: Yeah, that's great. Thanks, again for taking all my questions.
Speaker Change: Absolutely John Thank you thanks, Sean.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as there are no further questions I will now hand, the conference silver to Jason Brooks for his closing comments Jason.
Jason Brooks: Great. Thank you.
Speaker Change: On behalf of Tom and myself I just wanted to extend my sincere thanks to our shareholders.
Speaker Change: Board members and employees for their continued support and dedication.
Speaker Change: Your trusted guidance and hard work has been instrumental in delivering a strong Q1, and we look forward to a strong 2025. Thank you very much.
Speaker Change: Thank you, ladies and gentlemen, the conference of Rocky brands has now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.