Rocky Brands, Inc. announced financial results for its second quarter ended June 30, 2014.
Net sales for the second quarter increased 15.8% to $68.8 million compared to $59.4 million a year ago. Wholesale sales for the second quarter increased 23.7% to $56.7 million compared to $45.8 million for the same period in 2013.
This included a 16.8% increase in wholesale sales of the Company’s legacy brands. Retail sales for the second quarter increased to $10.1 million compared to $9.8 million for the same period last year. Military segment sales for the second quarter decreased to $2.0 million compared to $3.8 million in the second quarter of 2013.
Gross margin in the second quarter of 2014 was $22.6 million, or 32.8% of sales, compared to $20.3 million, or 34.2% of sales, for the same period last year. The 140 basis point decrease was driven by the combination of lower wholesale margins due primarily to costs associated with the seeding program with a key retail partner we announced in the first quarter of 2014 and lower retail gross margin than a year ago resulting from the completed transition to a web based retail platform which carries lower gross margin and lower operating expenses compared to the previous mobile store structure.
Selling, general and administrative (SG&A) expenses were $20.0 million, or 29.1% of net sales, for the second quarter of 2014 compared to $17.4 million, or 29.4% of net sales, a year ago. The $2.6 million increase in SG&A expenses was due largely to the additional expenses associated with the Creative Recreation brand, which was acquired in December 2013, and higher compensation expense related to a new mid-year bonus program that wasn’t in place a year ago. The 30 basis point improvement in SG&A as a percent of net sales was driven by leveraging expenses on higher sales.
Income from operations was $2.5 million, or 3.7% of net sales, compared to $2.9 million, or 4.8% of net sales, a year ago. Interest expense was $0.2 million for the second quarter of 2014, versus $0.1 million for the same period last year.
The Company’s funded debt was $43.4 million at June 30, 2014 versus $31.4 million at June 30, 2013. The majority of the increase was related to additional borrowings to fund the acquisition of Creative Recreation in the fourth quarter of 2013.
Inventory increased 6.5%, or $5.3 million, to $86.4 million at June 30, 2014 compared with $81.2 million on the same date a year ago. Inventory at June 30, 2014 included approximately $2.8 million associated with the acquisition of Creative Recreation. Based on current sales trends and the fall order book, the Company remains comfortable with its current inventory position.