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Rocky Brands, Inc. Message Board

  • greengrosser1 greengrosser1 Feb 22, 2013 11:54 AM Flag

    Can't trust management

    Awful results. As usual, management blames it on the weather and confidently assures us things will get better, drawing on a couple new initiatives for inspiration. But their past new initiatives never worked out, despite initial bumps from sell-in.

    Remember their launch of ZumFoot, the Euro casual shoe that Sharp said would open up a market 5x the size of their current markets? Or when they secured the Michelin license in '06? They also couldn't hold onto either the John Deere or Dickies licenses they got via EJ Footwear. And going back to '03, there was also their ill-fated acquisition of Gates Gloves--those sales plummeted shortly after.

    RCKY's top line has been falling pretty consistently since 2005, the year they acquired EJ Footwear, all under this same management, and the business is now falling off a cliff. The only areas that aren't tumbling (at the moment) are Durango and S2V military boots. But I'm not sure Durango is really doing as well as management says--go look at the websites of any of the retailers they said they were selling their new Durango City line to on the Q3 call. You won't see any such boots on DSW or Rack Room. There are a couple models on Zappos and OnlineShoes but these are all heavily discounted. And check out Academy Sports--they said this had become a much bigger account thanks to their new flag boots, but I don't see any such boots on their website. Clearly they showed growth in western on the sell-in of these new models over Q1 to Q3, but the sell-through has not been good. This is going to make future sell-in to the channel very difficult, and we could actually see western sales start falling this year.

    Re: S2V, they got that one right, but it's a single model in a small niche, and there's not much scope for growth. The fact that it had to be made in America (Puerto Rico counts) probably helped them get lucky here. Their competitors are already copying it, and long term I also wonder about the reduction of our military.

    So, it's hard to believe that their new healthcare shoes will be any more successful. Now they're bidding for private-label business and military contracts (both very low margin), just to fill up capacity in their manufacturing facilities. It seems a little desperate to me.

    Their brands used to be decent brands, once upon a time, but the sales trends say it all. It's a hyper-competitive industry and so many other brands have expanded into different types of boots, while new brands (like Ariat) innovate and gain a lot of share. And you have truly authentic brands like Justin and Tony Lama that have invested in their brands by sponsoring rodeos, etc. But RCKY just doesn't seem to have what it takes. I don't know if it's their product design or marketing (I wasn't impressed by their recent ads) or other execution issues, but a consistently declining top line isn't a good sign.

    They've done a good job of paying down the debt they took on from the EJ acquisition with the cash flow from the business, but at this rate of decline they will be losing money in a year or two, and the business could implode if they start losing accounts.

    They should just sell the company and salvage whatever value the brands still have for the benefit of shareholders. This management team has been there long enough and clearly they just don't have what it takes to succeed in this business.

    Sentiment: Hold

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    • For some reason, I am unable to post with my desktop.

      Bad quarter but Im still confident we can get above $20 in the next few years one way or the other.

      Is the family ready to put it up for sale ? Probably not.

    • any bet - this stock will go back to $15.92 again?

      I am buying just like last drop to $11-12.

    • I just went to DSW site, and saw 3 Durango boots at very modest discounts. I haven't checked the other statements.

      • 1 Reply to algo41
      • Hi Algo, I also saw 3 Durango boots on DSW, but those were traditional boots, not the new Durango City line that Sharp said was "opening up new distribution opportunities" with retailers like DSW, et al. on the Q3 call. My comment was specifically about the Durango City line, which Sharp also said had doubled in sales from the year prior.

        At the time I checked, I did see one model of Durango boots on the DSW site that looked similar in style to the Durango City line, even though it wasn't labeled as such (it had a leather harness and buckle). This model was selling at a discounted price of $80, vs. a list price of $144.

        I also called a couple DSW locations and they didn't carry any Durango boots whatsoever. It makes sense that the website would have a greater selection than a physical store.

        Rack Room's website didn't have any Durango, Rocky, or Georgia boots whatsoever. OnlineShoes did have Durango and Rocky boots (all listed as new brands) but I only saw one Durango City model. Zappos had some Durango boots, no Rocky boots. I saw a few Durango City boots there and these were all discounted.

        Hope this helps. Do post if you turn up anything from your field checks; I'm trying to connect the dots like everyone else...

        Sentiment: Hold

    • Your summary, is my summary as well. But it will bring out the cheerleaders...all telling you how they bought at $3 and made a bundle. This is a honey pot for the family and I have doubts of its worth as an acquisition to a major brand....or it would have been acquired.

      I am hopeful but skeptical is we will see $15 again for quite a while. Same pattern as happened not so long ago.

      • 1 Reply to westnash1
      • The brands certainly aren't going to get a premium because they're simply not top-tier brands and it's already a very crowded market, but I think somebody would buy their brands at some price. Their manufacturing facilities in DR and PR could be problematic--and I'm not sure how much it would cost to exit those (since an acquirer probably wouldn't want them).

        My guess is that if they sold the business today, they might get the current stock price or perhaps a slight premium, as there is a lot of asset value. However, if they wait and the business keeps declining, then all bets are off. The perceived value will be less, plus it's always tougher to sell something when your back is against the wall. Unfortunately, I think we could see sales fall in Q1; not only are my recent field checks discouraging, but the payroll tax increase can't help. RCKY has said in the past that its customers tend to live paycheck to paycheck, so the higher payroll taxes could have an immediate effect.

        Sentiment: Hold

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