Q2 2025 Rocky Brands Inc Earnings Call
Following the presentation, we will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference. Please press star zero for operator assistance at any time.
Operator: All participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded, and will now turn the conference over to Brendon Frey of ICR.
I would like to remind everyone that this conference call is being recorded and will now turn the conference over to Brendon Frey of ICR.
Thank you and thanks to everyone joining us today.
Brendon Frey: Thank you, and thanks to everyone joining us today. 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. Such statements are based on information and assumptions available at this time and are subject to changes, risks, and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements. 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 31 December 2024. I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands. Jason?
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.
Such statements are based on information and assumptions available at this time and are subject to changes risks and uncertainties, which may cause actual results to differ materially.
We assume no obligation to update such statements 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.
I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky brands Jason.
Thank you Brendan.
With me today is Tom Robertson, our chief operating and Chief Financial Officer.
Jason Brooks: Thank you, Brendon Frey. With me today is Tom Robertson, our Chief Operating and Chief Financial Officer. After our prepared remarks, we'll take your questions. We delivered very good Q2 results, significantly outperforming both last year and our own expectations through a strong execution across our diversified portfolio. High single-digit revenue growth and adjusted EPS that more than tripled to $0.55 per diluted share demonstrates the power of our multi-brand strategy and operational excellence. Three key drivers powered this performance. First, broad-based revenue momentum. Multiple brands and channels contributed year-over-year growth, with strong full price selling driving a 230 basis point gross margin expansion despite challenging consumer conditions. Second, disciplined cost management. We controlled our fixed cost base effectively, delivering 59% operating income growth while reducing interest expense and debt levels year-over-year. Third, our outdoor category reassurance, led by XTRATUF and Muck.
After all of them are repaired.
After our prepared remarks, we'll take your questions.
We delivered very good Q2 results significantly outperforming both last year and our own expectations through a strong execution across our diversified portfolio.
High single digit revenue growth and adjusted EPS that more than tripled to 55 cents per diluted share demonstrates the power of our multi brand strategy and operational excellence.
Three key drivers powered this performance first.
<unk> based revenue momentum multiple brands and channels continued year over year growth was strong full price selling driving a 230 basis point gross margin expansion despite challenging consumer conditions.
Disciplined cost management, we controlled our fixed cost base effectively delivering 59% operating income growth, while reducing interest expense and debt levels year over year.
Third our outdoor category reassurance led by extra tough and Marc outdoor is re emerging as a key growth engine alongside our traditional work and western strengths.
Jason Brooks: Outdoor is reemerging as a key growth engine alongside our traditional work and Western strengths. This outdoor transformation is particularly significant. Through the 2021 acquisition of the XTRATUF and Muck, we added two functional brands with deep fishing and farming roots, respectively. Now, especially with XTRATUF, we're building lifestyle components that broaden distribution and consumer reach. We are excited about the prospect of attracting more consumers to the brands and believe we are just starting to tap into an opportunity with a long runway of growth. Let me walk you through our Q2 brand performance. XTRATUF maintains its position as our fastest-growing brand, building accelerating momentum across multiple quarters. We're working hard just to keep pace with demand and our expanding distribution network. US wholesale significantly outpaced last year, increasing strong double digits with e-commerce growth equally as strong in Q2.
This outdoor transformation is particularly significant through the 2021 acquisition of the extra tough and Marc we added two functional brands with deep fishing and farming routes respectively.
Now, especially with extra tough we're building lifestyle components that broadened distribution and consumer reach we are excited about the prospect of attracting more consumers to the brands and believe we believe we are just starting to tap into an opportunity with a long runway of growth.
Let me walk you through our Q2 brand performance.
Extra tough maintained its position as our fastest growing brand.
Building accelerating momentum across multiple quarters, we're working hard just to keep pace with demand and our expanding distribution network.
The us wholesale significantly outpaced last year, increasing strong double digits with e-commerce growth equally as strong in the second quarter.
Key Q2 wins include sustained strength with authorized online partners expansions into boot and western retailers and new placement with prominent big box outdoor and fashion.
Jason Brooks: Key Q2 wins include sustained strength with authorized online partners, expansions into boot and Western retailers, and new placement with prominent big box outdoor and fashion partners. Our fall/winter 2025 lineup excites us. Fleece-lined ADBs, expanded Tailgate Collection styles, and a new Sesame Street children's line. Next, Muck delivered its best quarter-to-quarter comparison since 2023. Improved inventory positions, particularly in best-selling chore styles, combined with favorable weather, drove strong performance. Men's business posted solid mid-single-digit gains with double-digit growth across the upper Midwest, Northeast, and Southwest. Our women's business achieved strong double-digit increases versus Q2 2024, led by triple-digit growth in the Muckster II collection, including the Chicken Print series. New digital advertising focus on work and utility customers deliver our best campaign results in company history, driving brand awareness and e-commerce gains. Strategic partnerships include a collaboration with country star Dierks Bentley, furthering amplifying our reach.
Our fall winter 25 lineup excites us fleece lined adb's expanded tailgate collection styles, and a new Sesame Street children's line.
Next Mark delivered its best quarter to quarter comparison since 2023 <unk>.
Improved inventory positions, particularly in best selling chore styles combined with favorable weather drove strong performance.
Men's business posted solid mid single digit gains with double digit growth across the upper Midwest.
Northeast and southwest.
Our women's business achieved strong double digit increases versus Q2, 2024 led by triple digit growth in the muster two collection, including the chicken prints series, New digital advertising focus on work and utility customers deliver our best campaign results in company history.
Three.
Driving brand awareness and e-commerce gains.
Strategic partnerships include our collaboration with country start Jerks Bentley furthering amplifying our reach.
Durango achieved a high single digit growth driven by strong key account performance field accounts improved Q2 versus Q1 with momentum accelerating through May and June.
Jason Brooks: Durango achieved a high single-digit growth driven by strong key account performance. Field accounts improved Q2 versus Q1, with momentum accelerating through May and June. Farm and Ranch remained consistent with steady replenishment, positioning us well for H2 of the year. Our inventory composition of new releases and legacy favorites continues delivering results. Georgia Boot finished down modestly but showed progressive improvement throughout the quarter. Tariff-related timing shifts delayed a new fall product shipment by 1 month. Key accounts remained stable, driven by a large e-commerce partner and a work and western retailer chain returning to normal purchasing patterns. Farm and ranch softened due to Pacific Northwest weather impacts and inventory overstocks, while field accounts faced macroeconomic headwinds in May. The late quarter pickup should continue into the fall as our price point focused offerings resonate broadly.
Farm <unk> ranch remained consistent with steady replenishment positioning us well for the second half of the year, our inventory composition of new releases and legacy favorites continues delivering results.
<unk> boot finished down modestly but showed progressive.
Improvement throughout the quarter.
Tariff related timing shifts delayed a new fall product shipment by one month.
Key accounts remained stable driven by a large e-commerce partner and a work and western retailer chain returning to normal purchasing patterns.
Farm <unk> ranch soften due to Pacific northwest weather impacts and inventory overstock, while field accounts faced macroeconomic headwinds in may the late quarter pickup should continue into the fall as our price point focused offerings.
Resonate broadly.
Rocky work outdoor and Western all grew for the first time in several quarters without door and west up double digits, driven by new products strong best seller demand in key partnership expansions.
Jason Brooks: Rocky Work, Outdoor, and Western all grew for the first time in several quarters, with Outdoor and Western up double digits driven by new products, strong bestseller demand, and key partnership expansions. Profitability improved significantly through increased full price selling versus the prior year's overstock focus. The Work category strength came from online sales and improved farm store performance, plus continued expansion with national safety shoe distributors driving bestseller safety toe product. Outdoor showed encouraging signs despite lacking Q2 hunting seasonality, with hiking collections performing exceptionally well on our e-commerce site and partner platforms. Western Work, Western hybrid products excelled, particularly in our IronClad safety toe Western pull-on at major industry outlets, supported by strong online and farm store performance. Commercial Military and Duty rebounded nicely, exceeding Q2 expectations after a difficult start. Public Service division performed well, particularly USPS and the Code Red fire assortment.
<unk> ability improves significantly through increased full price selling versus the prior year's overstock focus.
The work category strength came from online sales and improved farm store performance plus continued expansion with national safety shoe distributors driving best seller safety toe product.
Outdoor showed encouraging signs despite lacking Q2 hunting seasonality with hiking collection is performing exceptionally well on our e-commerce site and partner platforms.
Western work Western and hybrid products excel, particularly in our irons call safety toe western pull on at major industry outlets supported by strong online and farm store performance commercial.
Commercial military and duty rebounded nicely.
Exceeding Q2 expectations after a difficult start.
Public service Division performed well, particularly the USPS and the code Red fire assortment, while commercial military segment momentum shifted as the U S government deployed allocated funds for the first time in months.
Jason Brooks: While commercial military segment momentum shifted as the US government deployed allocated funds for the first time in months. We secured three substantial US Navy orders, offsetting last year's contract sales. Looking ahead, we're optimistic about military prospects. Rocky Brands recently earned a USMC hot weather boot certification, enabling us to pursue large bid opportunities and provide individual marine sales going forward. In retail, our B2B Lehigh business grew mid-teen versus last year. As our sales team realignment reaches its 1-year anniversary, new processes are generating sustainable double-digit growth. Customer acquisition and spending remain strong, with improved subsidy utilization and higher average subsidy dollars year over year, largely offsetting supply chain and tariff pressure. Before turning to Tom, I want to thank the entire team for exceptional execution during a dynamic quarter. Despite the global tariff uncertainty and economic pressures, our performance demonstrates our diversified portfolio's resilience.
We secured three substantial U S Navy orders offsetting last year's contract sales.
Looking ahead, we're optimistic about military prospects Rocky brands recently earned a U S. M C Hot weather boots certification, enabling us to pursue large bid opportunities and provide individual marine sales going forward.
In retail our <unk> business grew mid teens versus last year as our sales team realignment reaches its one year anniversary new processes are generating sustainable double digit growth cut.
Customer acquisition and spending remained strong with improved subsidy utilization and higher average subsidy dollars year over year, largely offsetting supply chain and tariff pressure.
Before turning to Tom I want to take.
Want to thank the entire team for exceptional execution during a dynamic quarter. Despite despite the global tariff uncertainty and economic pressures our performance demonstrates our diversified portfolios resilience.
Particularly proud of how quickly we've adapted to the changing trade conditions.
Jason Brooks: I'm particularly proud of how quickly we've adapted to the changing trade conditions, leveraging our Dominican Republic and Puerto Rican facility, and implementing strategic sourcing changes that offset much tariff impact. While we remain appropriately cautious about the broader environment, our strategic positioning, manufacturing flexibility, and robust brand portfolio positions us well for continued growth and increased shareholder value. The momentum across key brands like XTRATUF and Durango, combined with our operational efficiencies and strong balance sheet, gives us confidence to navigate the challenges while capitalizing on significant opportunities ahead. I will now turn the call over to Tom.
Leveraging our Dominican Republic, and Puerto Rican facility and implementing strategic sourcing changes that offset much tariff impact.
While we remain appropriately cautious about the broader environment, our strategic positioning manufacturing flexibility and robust brand portfolio positions us well for continued growth and increased shareholder value.
The momentum across key brands like extra tough and Durango combined with our operational efficiencies and strong balance sheet gives us confidence to navigate the challenges while capitalizing on significant opportunities ahead, I will now turn call over to Tom.
Thank you Jason the acceleration of both the top and bottom line. We delivered in Q2 is a testament not only to the strength and resilience of our diverse brand portfolio, but also a reflection of the hard work of the entire organization. Our teams did an excellent job capitalizing on new opportunities and implementing strategic shifts.
Tom Robertson: Thank you, Jason. The acceleration of both the top and bottom line we delivered in Q2 is a testament not only to the strength and resilience of our diverse brand portfolio, but also a reflection of the hard work of the entire organization. Our teams did an excellent job capitalizing on new opportunities and implementing strategic shifts throughout the period, allowing us to outperform expectations in a difficult operating environment. Reported net sales for Q2 increased 7.5% to $105.6 million. By segment, wholesale sales net increased 7.1% to $73.1 million. Retail net sales increased 13.9% to $29.7 million, and contract manufacturing net sales were $2.8 million. Turning to gross profit. For Q2, gross profit was $43.3 million or 41.0% of net sales, compared to $38.0 million or 38.7% of net sales in the same period last year.
About the period, allowing us to outperform expectations in a difficult operating environment.
Reported net sales for the second quarter increased seven 5% to $105 6 million by.
<unk> wholesale sales net increased seven 1% to $73 1 million retail net sales increased 13, 9% to $29 $7 million and contract manufacturing net sales were $2 8 million.
Turning to gross profit for the second quarter gross profit was $43 3 million or <unk>, 41.0% of net sales compared to 38 point.
Zero $1 million.
Or 38, 7% of net sales in the same period last year.
The 230 basis point improvement in gross margin was primarily driven by higher wholesale margins combined with a higher percentage of retail sales, which carry higher gross margins than our wholesale and contract manufacturing segments.
Tom Robertson: The 230 basis point improvement in gross margin was primarily driven by higher wholesale margins, combined with a higher percentage of retail sales, which carry higher gross margins than our wholesale and contract manufacturing segments. Reported gross margins by segment were as follows: wholesale up 300 basis points to 40.3%, retail down 170 basis points to 45.2%, and contract manufacturing margins were 12.4%. Operating expenses were $36.1 million or 34.2% of net sales, compared to $33.5 million or 34.1% of net sales last year. Excluding $0.7 million of acquisition-related amortization in both periods, adjusted operating expenses were $35.4 million and $32.8 million respectively. The increase in operating expenses was driven primarily by higher selling costs associated with the increase in direct-to-consumer sales and incremental marketing investments to drive growth.
Quarterly gross margins by segment were as follows wholesale up 300 basis points to 43%.
Retail down 170 basis points to 45, 2%.
Contract manufacturing margins were 12, 4%.
Operating expenses were $36 1 million or 34, 2% of net sales compared to $33 5 million or 34, 1% of net sales last year.
Excluding <unk> 7 million of acquisition related amortization in both periods adjusted operating expenses were $35 4 million and $32 8 million respectively.
The increase in operating expenses was driven primarily by higher selling costs associated with the increase in direct to consumer sales and incremental marketing investments to drive growth.
Income from operations increased 58, 7% to $7 2 million.
Tom Robertson: Income from operations increased 58.7% to $7.2 million or 6.8% of net sales, compared to $4.5 million or 4.6% of net sales last year. On an adjusted basis, operating income was $7.8 million or 7.4% of net sales, compared to $5.2 million or 5.3% of net sales a year ago. For Q2 of this year, interest expense was $2.5 million, compared with $6.1 million last year, inclusive of a $2.6 million one-time term loan extinguishment charge for the prior year period. Excluding the one-time term loan extinguishment charge, interest expense in Q2 for 2024 was $3.5 million. The decrease reflects lower interest rates as a result of the debt refinancing we completed in April 2024, as well as lower debt levels.
Or six 8% of net sales compared to $4 5 million or four 6% of net sales last year.
On an adjusted basis operating income was $7 8 million or seven 4% of net sales compared to $5 2 million or five 3% of net sales a year ago.
For the second quarter of this year interest expense was $2 5 million compared with $6 1 million last year inclusive of a $2 6 million.
One time term loan extinguishment charge for the prior year period.
Excluding the one time term loan extinguishment charge interest expense in the second quarter for 2024 was $3 5 million. The decrease reflects lower interest rates as a result of the debt refinancing we completed in April of 2024, as well as lower debt levels.
On a GAAP basis, net income was $3 6 million or <unk> 48 per diluted share compared to a net loss of $1 2 million or a loss of <unk> 17 per diluted share in the second quarter of 2024, adjusted net income was $4 1 million or <unk> 55 per diluted share.
Tom Robertson: On a GAAP basis, net income was $3.6 million or $0.48 per diluted share compared to a net loss of $1.2 million or a loss of $0.17 per diluted share in Q2 2024. Adjusted net income was $4.1 million or $0.55 per diluted share compared to $1.3 million or $0.17 per diluted share a year ago. Turning to our balance sheet. At the end of Q2, cash and cash equivalents were $2.8 million and our total debt net of unamortized debt issuance costs totaled $132.5 million, a decrease of 13.1% since 30 June 2023. Inventories at the end of Q2 were $186.8 million, up 6.8% compared to $175.0 million a year ago, with the increase driven by higher tariffs as pairs are relatively consistent year over year.
Compared to $1 3 million or <unk> 17 per diluted share a year ago.
Turning to our balance sheet at the end of the second quarter cash and cash equivalents were $2 $8 million and our total debt net of unamortized debt issuance cost totaled $132 5 million.
A decrease of 13, 1% since June 30 of last year.
Inventories at the end of the second quarter were $186 $8 million.
Up six 8% compared to $175.0 million a year ago with the increase driven by higher tariffs as Paris are relatively consistent year over year as.
As we mentioned last quarter, we purposely purposely accelerated receipts in the first half of the year. After the initial out of tariffs were announced and we continue to bring product in early to avoid the impact of higher tariffs.
Tom Robertson: As we mentioned last quarter, we purposely accelerated receipts in H1 after the initial round of tariffs were announced and we continue to bring product in early to avoid the impact of higher tariffs announced later this year. That said, we have approximately $11 million of incremental tariffs on the balance sheet that will flow through our P&L over the remainder of the year, with the bulk of the impact occurring in Q4. With respect to our outlook, based on the Q2 performance and inclusive of tariffs that have been announced this year through today, combined with the mitigation actions, we are increasing our prior year 2025 guidance. Revenue is now expected to increase between 4% and 5% compared to 2024 levels, up from our prior guidance for revenue to grow in the low single-digit range.
Announced later this year.
That said.
We have approximately $11 million of incremental tariffs on the balance sheet that will flow through our P&L over the remainder of the year with the bulk of the impact occurring in the fourth quarter.
With respect to our outlook based on the second quarter performance and inclusive of tariffs that have been announced this year through today combined with the mitigation actions, we are increasing our prior year 2025 guidance.
Revenue is now expected to increase between four 5% compared to 2024 levels up from our prior guidance.
Core revenue to grow in the low single digit range.
We are forecasting gross margins to be down roughly 70 basis points from the 39, 4% reported in 2024 inclusive of roughly $11 million of.
Tom Robertson: We are forecasting gross margins to be down roughly 70 basis points from the 39.4% reported in 2024, inclusive of roughly $11 million of headwinds from tariffs currently in place, partially offset by our pricing actions. It is important to note that the margin benefits of shifting production to our own Dominican Republic and Puerto Rico facilities will take time to fully materialize, with the largest margin benefits beginning in 2026. SG&A is still expected to be up in dollars from an increase in our marketing spend to support growth and higher logistics costs from the projected increase in retail sales. However, we are now expecting to realize modest expense leverage versus last year on higher sales. Finally, we now expect 2025 EPS to increase approximately 10% over last year's $2.54 a share, up from our prior forecast for EPS to be down slightly year over year.
Headwinds from tariffs currently in place.
Fully offset by our pricing actions.
It is important to note that the margin benefits of shifting production to our own Dominican Republic, and Puerto Rico facilities will take time to fully materialize with the largest margin benefits beginning in 2026.
SG&A is still expected to be up in dollars from an increase in our marketing spend to support growth and higher logistics costs from the projected increase in retail sales.
However, we are now expecting to realize modest expense leverage versus last year on higher sales.
Finally, we now expect 2025 EPS to increase approximately 10% over last year's $2 54 a share.
From our prior forecast for EPS to be down slightly year over year.
In terms of the quarterly shape for the second half we are expecting growth in gross margins to be stronger in the third quarter versus the fourth quarter as we've adopted an appropriately conservative view on Q4, when most of the impact from tariffs on pricing and costs will have consumers in our P&L. In addition, the fourth quarter includes a sequential step up.
Tom Robertson: In terms of the quarterly shape of H2, we are expecting growth and gross margins to be stronger in Q3 versus Q4 as we've adopted an appropriate conservative view on Q4, when most of the impact from tariffs on pricing and costs will hit consumers and our P&L. In addition, Q4 includes a sequential step-up in marketing spend to drive demand during the key holiday season. That concludes our prepared remarks. Operator, we are now ready for questions.
And marketing spend to drive demand during the key holiday season.
That concludes our prepared remarks, operator, we are now ready for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from the line of Jonathan Komp with Baird. Please proceed with your question.
Information total indicate your line is in the question queue.
You May press star two to remove yourself from the queue.
Dissipated using speaker equipment, it may be necessary to pick up the handset before pressing the star keys one.
One moment, please while we poll for questions.
Our first question comes from the line of Jonathan Komp with Baird. Please proceed with your question.
Yes, hi, good afternoon. Thank you.
I wanted to start if I could ask just how how things have gone in terms of shifting the supply chain I know you've talked quite a bit on the last call about some of the changes, but any reaction or result, so far there and then.
Jonathan Komp: Yeah. Hi, good afternoon. Thank you. I want to start, if I could ask just how things have gone in terms of shifting the supply chain. I know you talked quite a bit on the last call about some of the changes, but any reaction or results so far there? Separately on pricing, can you just comment on how you're seeing the pricing flow through, either through your own retail business or the price increases you passed along to some of your wholesale partners? Yeah. Hey, John.
Separately on pricing could you just comment on how how youre seeing the pricing flow through either through your own retail business or.
The price increases you pass along to some of your wholesale partners.
Yeah, Hey, John Thanks for being on the call I'll take the first part on sourcing and logistic Jason way out on the price on the pricing, but we were ahead of schedule and getting our production shifted from from other countries.
Jason Brooks: Hey, John.
Jason Brooks: Thanks for being on the call. I'll take the first part on sourcing and let Jason weigh in on the pricing. We're ahead of schedule in getting our production shifted from other countries. I would tell you that our expectation, really as we see it now in China, from a go-forward standpoint, again, things could shift and change after 1 August, which seems to be a date that we're going to get some more news on tariffs. I think what we're most proud about is our ability to shift production to our Dominican Republic facility first, and now we're starting to shift production to our Puerto Rican facility. We are ahead of schedule in the DR, and we have boots inbound to us now, and we have for a couple of weeks. We're excited to see that plan coming to fruition.
I would tell you that we are our expectation really.
As we see it now in China.
From a go forward standpoint, again things could shift and change after August one which seems to be a date that they were going to get some more news on tariffs, but I think what we're most proud about is our ability to shift production to our Dominican Republic facility <unk>.
And now we're starting to shift production to our Puerto Rican facility and.
We are ahead of schedule in the Dr and we have boots inbound to US now and we have for a couple of weeks.
To see that plan coming to fruition, we will just be cautious about any changes that come about August 1st whether there was an extension with a deadline or if there's more color on changes, but everything is going as planned from our sourcing and manufacturing perspective, we just need to see the game changes here later this week.
Tom Robertson: We'll just be cautious about any changes that come about 1 August, whether there's an extension with the deadline, or if there's more color on changes. Everything is going as planned from a sourcing manufacturing perspective. We just need to see if the game changes here later this week.
Yes, and then from a pricing standpoint.
Jason Brooks: Yeah. From a pricing standpoint, I would tell you that pretty much all of our retail partners were understanding. We got a little pushback, but I think the world really, the US, knew where everything was and that things were coming. We've heard of some of our competitors having significantly higher price increases. We've heard some that have had lower than what we took. It's taken us some time. That price increase went into effect in June, and we've had to work with some of our retail partners to get it into place throughout June. It was a process, but I feel pretty good about where we're at.
I would tell you that pretty.
Pretty much all of our retail partners.
We're understanding we got a little pushback.
But I think the the world really the U S.
New.
Where everything was that things were coming.
We've heard of some of our competitors, having significantly higher price increases and then we've heard some that are ad <unk>.
Then what we took so.
It's taken us some time that price increase went into effect in June.
And we've had to work with some of our retail partners to get it into place throughout June. So it was it was a process, but I feel pretty good about where we're at yes, I think just to add on there we were particularly.
Tom Robertson: I think just to add on there, we were particularly cautious when we did our price increase to make sure that we maintain retailers' margins at MAP or minimum advertised price. We think that helped with delivering the message, because we know that not all brands took that position.
Cautious when we did our price increase to make sure that we maintain retailers.
Margins at macro minimum advertise price. So so we think that health with delivering the message because we know that not all brands took that position.
Okay. That's helpful color and then as a follow up.
Jonathan Komp: Okay, that's helpful color. As a follow-up, I want to ask about the guidance raise. Tom, as you think about the drivers of the increase, could you help us understand just how much was related to Q2 outperformance versus any change in how you're thinking about H2, and any of the order indications you're seeing? Just want to get a better understanding of the drivers.
To ask about the guidance raise.
As you think about the drivers of the increase.
Could you help us understand how much was it related to second quarter outperformance versus your own.
Any change in how youre thinking about the back half.
And you'd be ordered.
<unk> Youre seeing just.
I wanted to get a better understanding of the drivers.
Yes. So if you look at the updated guidance I think we are.
Tom Robertson: If you look at the updating guidance, I think the win in Q2 from a top-line perspective is essentially the implied increase that we have for the rest of the year. As we look to the third and fourth quarter, our bookings for Q3 continue to look very strong. We'll also, and more importantly, we'll be in a better inventory position for Muck and XTRATUF, particularly in the third quarter than we were in the prior year. We feel stronger about the third quarter than we do the fourth. There's always this cautiousness in us with the price increase and seeing how that plays out at retail, because the reality is we haven't had enough time to see how the market acts with the price increase. We do think we're very competitive compared to what our peers and other brands have done.
In Q2 from a topline perspective.
It is essentially the inquiry implied increase that we have for the rest of the year as we look into the third and fourth quarter. Our bookings for Q3 continue to look very strong, but we will also and more importantly will be in a better inventory position.
<unk>, an extra tough, particularly in the third quarter than we were in the prior year.
And so and so we feel stronger about about the third quarter than we do the fourth.
And then there is always this this cautious newness and us with what the price increase and see how that plays out of retail because the reality is we haven't had enough time to see.
How the <unk> price increase, but we do think we're very competitive compared to what our peers and.
In other brands have done.
Yeah, just just to add I think one of the things that we are really pleased with is pretty much all of the brands, Georgia was kind of flat down a little but we have seen rocky come back a little bit right. Durango is been doing pretty good extra tough has been strong and.
Jason Brooks: Yeah, just to add, I think one of the things that we are really pleased with is pretty much all of the brands. Georgia was kind of flat down a little, but we've seen Rocky come back a little bit, right? Durango's been doing pretty good. XTRATUF has been strong. Now we've seen Muck kind of come back. We're anticipating, because of what Tom said about us having better inventory in Q3 and Q4, that we'll hopefully see that driver happen with all of the brands, and maybe even Georgia will start to see some pickup too. I think the fact that we've got the brands all kind of moving in the right direction is really a positive for us as well.
And now we've seen kind of come back.
We're anticipating.
Because of what Tom said about us having better inventory in Q3, and Q4 that we'll hopefully see that that driver happen with all of the brands and maybe even Georgia will start to see some pick up too. So I think the fact that we've got the brands all kind of moving in the right direction is really a positive.
For us as well.
Okay.
And last one from me can you just maybe give us an update.
Jonathan Komp: Last one from me. Could you just maybe give us an update, how would you frame up the relative size of the outdoor versus work business across your brand portfolio? Any comment on sort of relative top-line revenue growth rates for the year? Thanks again.
How would you frame up the relative size of the outdoor versus work business across your brand portfolio.
And any any comment on sort of <unk>.
Relative top line revenue growth rates for the year.
Thanks again.
Yes, so I would say there are outdoor category.
Tom Robertson: Yeah. I would say that our outdoor category is certainly growing at a rate faster than our other areas.
Is certainly growing at a rate faster than our other areas.
And we were trying to look it up here real quick.
Jason Brooks: We're trying to look it up here, Tom, real quick.
Work categories, our biggest though.
Tom Robertson: No, yeah. No.
Jason Brooks: The work category is our biggest, though.
The work category is our biggest category.
Tom Robertson: The work category is our biggest category, followed by the outdoor category, with a lot of that growth happening is in XTRATUF and Muck as Jason touched on in his prepared remarks. As we look at it for the quarter, the outdoor category made up about a third of the sales for Q2. We think that as we get into the Q3 and Q4, we'll see that acceleration continue, and so outdoor is going to continue to be a bigger piece of the total pie.
Followed by by the outdoor category with a lot of that growth happening as an extra top and mark as.
As Jason touched on in his prepared remarks.
As we look at it for the quarter.
The outdoor category made up about a third of the sales.
For Q2.
So I think that as we get into the Q3 and Q4, we will see that acceleration continue as the outdoor is going to continue to to be a bigger piece of the total pie.
That's very helpful. Thanks again.
Jonathan Komp: That's very helpful. Thanks again.
Thank you.
Thank you.
Jason Brooks: Thank you.
Our next question comes from the line of Janine Fisher with BTG. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Janine Stichter with BTIG. Please proceed with your question.
Hi, good afternoon.
Just to get your thoughts on how youre feeling about the consumer versus when we last spoke.
Janine Stichter: Hi, good afternoon. Hoping just to get your thoughts on how you're feeling about the state of the consumer versus when we last spoke. On one hand, see a nice increase in retail sales there in Q2, but then you do mention weakened visibility into consumer demand. Just curious what signals you're getting from the consumer. I know it's still early, but any data or thoughts you have on the sell-throughs since you've raised prices would be really helpful. Thank you.
One hand, and see a nice increase in retail sales and Keith.
Thank you Jim mentioned weekend developed visibility into consumer demand just curious what signals you're getting from that.
Consumer and I know, it's still early but any data or thoughts you have on the sell throughs.
Great prices would be really helpful. Thank you.
Yeah, great Great question by the way because.
Jason Brooks: Yeah. Great question, by the way, because I would tell you that the consumer is a little confusing right now. When you read the data that we get from our retail partners and we look at the sell-through, we're getting really positive information there. I know not all categories in the marketplace are getting the same kind of results. When you look at the work category, the farm and ranch, the outdoor category, we're seeing pretty good sell-through at those retailers. We're excited about that. We, again, are pretty cautious and trying to be cautiously optimistic about it. It seems like our guy is doing okay, but they're also very fickle. You can see 1 week where the numbers are really strong, and then the next week, maybe not so. We're just following through it and seeing where it ends up.
I would tell you that the consumer is a little confusing right now.
When you.
Read the data that we get from our retail partners and we look at the sell through.
We're getting really positive.
Information, there and I know not all.
Categories in the marketplace are getting the same kind of results, but when you look at the work category the farm and ranch.
The outdoor category, we're seeing pretty good sell through at those retailers and so we're excited about that we again are pretty cautious and trying to be cautiously optimistic about it.
But it seems like our guy is doing okay.
But they're also very fickle and you can see one week, where the numbers are really strong and then the next week maybe not so so.
We're just following through it and and see where it ends up but I think we again are cautiously optimistic that they are doing okay.
Jason Brooks: I think we, again, are cautiously optimistic that they're doing okay.
I think jeanine just to dive in a little bit.
Tom Robertson: Yeah. I think, Janine Stichter, just to dive in a little bit. If we look to our e-commerce websites to give us the biggest pulse or barometer of how pricing is impacting the customer. When we look at June, our price increase went into effect of 1 June on the websites. We actually saw similar growth in June as we saw in the rest of the quarter from an e-commerce perspective. In July, so far, it's relatively flat on our e-commerce websites. There are some challenging comps in there for Prime Day and things like that. We're going to keep our eye on this. There doesn't appear to be a dramatic shift on the websites one way or the other with the pricing going into place.
If we look to our ecommerce websites to give us the biggest pulse or barometer of how pricing is impacting the customer and so when we look at June the pricing price increase went in effective.
June one on the websites and so we actually saw similar growth in June as we saw.
And the rest of the quarter from an E Commerce perspective in July so far it's relatively flat on e-commerce on our e-commerce websites.
There are some challenging comps in their prime days and things like that so so we're going to keep our eye on this.
But it doesn't appear to be a dramatic shift on the websites one way or the other.
With the pricing going into place.
Alright, that's helpful color and then maybe just an extra cost really interesting about the lifestyle opportunity. There. If you could just maybe help us size up what the opportunity looks like there and how you would expect that Bob.
Janine Stichter: All right. That's helpful color. Maybe just on XTRATUF, really interesting about the lifestyle opportunity there. If you could just maybe help us size up what the opportunity looks like there and how you would expect that to evolve within the next year or so?
And the next year or so.
Yes.
Ill jump in I'm sure Tom will add he loves extra tough so.
Jason Brooks: Yeah. I'll jump in. I'm sure Tom will add. He loves XTRATUF. One of the things we're seeing is the move from men's to women's, and then also kids. We are seeing some pretty good growth in women's footwear and some pretty good growth in kids' footwear, which is expanding into probably more use for maybe what we would talk about, maybe soccer moms or even as just a normal rain boot. If it's just raining out there, they're kicking those on instead of some other rubber boot that they used to have, maybe. It's still a very functional product and use of it, but the activity is being done, and the colorways that are being done, and the people that are using it are really just kind of blowing it up. We're seeing more expansion inland.
One of the things we're seeing is is the move.
From men's to women's and then also kids. So we are seeing some pretty good growth in women's footwear, and some pretty good growth in kids footwear.
Is expanding into probably more used for maybe.
What we would talk about maybe soccer moms or.
Even as just a normal rain boots, so fits just raining out there they are kicking those on instead of some other rubber boot they used to have maybe.
And so it's not it's not.
It's still very functional.
Product use of it but but the activity is being done in the color ways that are being done and the people that are using it.
Really just kind of blowing it up and then we're seeing more expansion inland. So the farther you get away from the water, we're starting to see more people use it.
Jason Brooks: The farther you get away from the water, we're starting to see more people use it in those areas as well.
In those areas as well.
Yes, I mean, just to me, Jason pretty much hit, but I think as you look to we continue to expand the Adv sport line.
Tom Robertson: Yeah. Jason pretty much hit it. I think as you look to, we continue to expand the ADB sport line. That is our fastest-growing collection in XTRATUF. What we've been able to realize, and you can see this migration in your sales heat maps, is that it's more than just fishing consumers now. It's being carried by retailers that normally wouldn't even sell to that demographic. It's really exciting to see it in retailers and on retailers' websites. That's really going to broaden the reach of the brand to new consumers. That coupled with, we've got more and more different footwear products, and we've also added some apparel assortment to the brand as well. Our Riptide collection, our Ana sandal collection is performing well.
That is our fastest growing collection and extra tough.
And what we what we've been able to realize and you can see this migration in your sales your heat maps is that it's more than just fishing consumers now.
Being carried by retailers that normally wouldn't even sell to that demographic.
And so it's really exciting to see it.
And retailers and on retailers' websites, that's really going to broaden the reach of the brand.
Two new consumers and then that coupled with we've got more and more different types of different footwear products and we've also added some apparel assortment.
The brand as well so.
Our riptide collection or on a sandal collection is performing well and so we're excited to see what that would go because.
Tom Robertson: We're excited to see where that would go because XTRATUF is so much of the six-inch Ankle Deck Boot to most consumers. Those same consumers wear flip-flops. They wear EVA shoes as well. We want them to grab XTRATUF instead of grabbing a brand that they were wearing before.
Extra tough has been so much of the six inch ankle that food to most consumers.
Those same consumers were flip flops.
They were EMEA.
Jews as well and so we want them to grab extra tough instead of having a brand that they were running before.
Awesome. Thanks, so much.
Thank you.
Janine Stichter: Awesome. Thanks so much.
Thank you.
Jason Brooks: Thank you.
And as a final question.
Operator: Thank you. As our final question that I have from the line of Bruce Jeller with Jeller Ventures. Please proceed with your question.
From the line Bruce Gellar.
Gentlemen ventures. Please proceed with your question.
Hey, good afternoon gentlemen.
Hi, Bruce.
Bruce Jeller: Hey, good afternoon, gentlemen.
Hey, congratulations on doing a very admirable job in a difficult consumer environment here.
Jason Brooks: Hey, Bruce.
Bruce Jeller: Hey, congratulations on doing a very admirable job in a difficult consumer environment here.
Thank you.
My first question relates to.
Jason Brooks: Thank you.
Bruce Jeller: My first question relates to, are you seeing the prospects for or any actual market share gains related to your ability to manage or to manufacture product in-house?
Are you seeing.
The prospects for or any actual market share gains related to.
Your ability to manage or to manufacture product.
In house.
Yeah I'll start with this one Bruce I think we're going to continue to leverage our in house operations, we've touched on the Dominican Republic, and Puerto Rico.
Tom Robertson: Yeah. I'll start with this one, Bruce. I think we're going to continue to leverage our in-house operations. We've touched on the Dominican Republic and Puerto Rico. We are going to be able to keep our costs down better than some of our peers, and it's also making us more nimble and flexible. If you just take rubber boot production, for example, we will have twice the amount of volume come out of the Dominican Republic, which currently is at 10%, compared to what we did in 2024 and through the date in 2025. That's going to materialize because we have a lot of the capacity in both in-house and outsourced in the Dominican Republic, and a lot of our peers are in geographies that have higher tariffs.
We are going to be able to keep our costs down.
Better than some of our peers and it is also making us more nimble and flexible and so if you just take rubber group production. For example, we will have twice the amount of volume come out of the Dominican Republic, which currently is at 10%.
Compared to what we did in 2024 and through the data in 2025, and so that's going to materialize because a lot of our peers.
We have a lot of the capacity in both.
Both in house and outsourced in the Dominican Republic.
Out of our peers are in geographies that have higher tariffs and so we should be able to be more competitive.
Tom Robertson: We should be able to be more competitive than our peers in that situation.
Than our peers in that situation.
Okay.
That's great and what percentage of your overall product.
Bruce Jeller: That's great. What percentage of your overall product will be manufactured in-house, say, next year, in full calendar year of 2026?
We will be manufactured in house say next year in full calendar year 2026.
So we're still working on on that number, but I would put the number.
Tom Robertson: We're still working on that number. I would put the number probably somewhere closer to 40%, 45%.
Probably somewhere closer to $40 45.
We are going to push as much as we can and if we can hit.
Bruce Jeller: Yeah.
Tom Robertson: We are going to push as much as we can, and if we can hit 50%, that would be ideal. We're making this transition. We're doing it as quickly as we can, but we're doing it very methodically to make sure that we don't have any quality issues or things like that that would turn away a customer.
50% that would be that would be ideal, but we are we're making this transition between as quickly as we can but we're doing it very methodically to make sure that we don't have any quality issues or things like that that would that we turn away customers.
That's great to hear it seems like a real competitive advantage.
Bruce Jeller: That's great to hear. It seems like a real competitive advantage at this point in time. I have another question related to your overall mix of business. It seems like maybe it's been shifting a little bit more towards your own direct to consumer e-commerce over the past few years. Can you, or do you disclose the breakdown between wholesale and direct to consumer, and can you discuss how that has been shifting recently and what the implications are on your overall gross margin mix going forward as that continues to move towards direct to consumer?
At this point in time.
I have another question related to your overall mix of business.
Seems like maybe it's been shifting.
Bit more towards your own direct to consumer E Commerce.
Over the past few years can you or do you disclose the breakdown between wholesale and direct to consumer and can you discuss how that has been.
And then shifting recently and what the implications.
Our on your overall gross margin mix going forward is that.
<unk> continues to move towards direct to consumer.
Yes, so so we don't disclose our D to C being in our branded websites. We do at the retail segment, obviously, which we disclose I would tell you that that in that retail segment about half of the say a little bit more than half the sales are our lehigh business.
Tom Robertson: Yeah. We don't disclose our D2C being in our branded websites. We do have the retail segment, obviously, which we disclose. I would tell you that in that retail segment, about half of the sales, a little bit more than half the sales are Lehigh business, and the other half being both our branded e-commerce websites and our marketplace sales, where we're selling directly on marketplaces. As we touched on in the prepared remarks, Lehigh continues to grow at the mid-teen numbers. With the total increase of 13.9%, we saw the branded websites fall a little short of the average there from a blended standpoint. I think the really unique thing is the DTC breakout between brands and the differences in the percentage of sales there.
And the other half being our growth our branded e-commerce websites in our marketplace sales, where we're selling directly on on marketplaces.
And as we touched on in the prepared remarks.
Our Lehigh continues to grow at the mid teen numbers.
And so with the total increase of 13, 9% we saw in the branded websites fall a little short.
The average there from a blended standpoint, but I think the.
Really unique thing is as the DTC breakout between brands and the difference is the percentage of sales there and so when you look at our brands such as extra tough.
Tom Robertson: When you look at a brand such as XTRATUF, it is a much higher percentage of its sales are online. Part of that's driven probably by the consumer buying it, and the lack of XTRATUF's presence in some big box retailers which is getting better. XTRATUF is by far the leader in our D2C business.
It is a much higher percentage.
<unk> sales around online and part of Thats, driven probably by the consumer buying it.
And the lack of of extra cups presence in some big box retailers, which is getting better.
But extra tough is by far the leader in our DTC business.
And I think I'll just add Bruce it's absolutely somewhere we are focused on and have been focused on.
Jason Brooks: I think I'll just add, Bruce, it's absolutely somewhere we are focused on and have been focused on over the last 4 or 5 years. We do have to balance it, right? We do have a very big wholesale business that we have to manage with our wholesale customers and try to make sure that we can both live together there. The reality is everybody has their own websites, and that's where we're going to try to drive people to, and hopefully their experience is good there, and we can continue to grow that business.
Over the last four or five years.
And but we do have to balance it right. We do have a very big wholesale business that we have to manage with our with our wholesale customers and try to make sure that we can both live together there, but the reality is is everybody has their own web sites and Thats, what were going to try to drive people.
Two and hopefully their experiences good there and we can continue to grow that business.
Okay.
Great. Thanks for the update on that and my last question relates to the balance sheet.
Bruce Jeller: Great. Thanks for the update on that. My last question relates to the balance sheet. You guys have done a great job over the last 12 to 18 months or so with getting the balance sheet back into more comfortable shape. I believe typically you do pretty well in terms of cash generation in H2 of the year. Based on where you stand today and the guidance you've laid out, how much debt do you think you will be able to pay down in H2 of this year?
You guys have done a great job over the last.
12 to 18 months or so with getting it getting the balance sheet back into.
More comfortable shape.
I believe typically you do pretty well in terms of cash generation in the second half of the year.
Based on where you stand today and the guidance you've laid out how much debt.
Do you think you will be able to pay down in the second half of this year.
It's a really good question Greg.
The reality of it is is that these tariffs are had been a strain on cash flow.
Tom Robertson: It's a really good question, Bruce. The reality of it is that these tariffs have been a strain on cash flow. Ideally, the price increase will realize that and convert that. I don't think we will see the same pay-down that we saw in H2 of last year, but to continue to have debt down 10%, 13% from prior year is certainly something we see to be able to do.
Ideally will the price increase will realize that and convert that.
I don't think we will see.
The same paydown that we saw in the last half of last year, but to continue to have that downturn and 13% from from prior year.
Certainly something we see to be able to do.
Terrific well, congrats again and best of luck in the second half.
Bruce Jeller: Terrific. Well, congrats again and best of luck in H2.
Hey, Thanks, Bruce and we will keep working on that that I promise you.
Jason Brooks: Hey, thanks, Bruce. We'll keep working on that debt, I promise you.
I know you will thank you.
Bruce Jeller: I know you will. Thank you.
Okay.
Thank you.
We have reached the end of the question and answer session.
Operator: Thank you. We have reached the end of the question and answer session. Therefore, I will now turn the call back over to Jason Brooks for closing remarks.
Now I'll turn the call back over to Jason for closing remarks.
Great. Thank you.
Firstly I just want to thank the rocky team here.
Jason Brooks: Great. Thank you. First, I just want to thank the Rocky team here. They have really been doing an amazing job for H1 2025 and put us in an amazing position to finish 2025 strong, and I look forward to working with all of you to make that happen. Thank you to our shareholders and our board members. Let's finish strong in 2025, team. Thank you.
They have really been doing an amazing job for the first half of 2025 and put us in an amazing position to finish 2025 strong and I look forward to working with all of you to make that happen and thank you to our shareholders and our board members and let's finish strong in 2025 team.
Thank you.
Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a great.
Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.