Rising product costs dented margins and buoyed inventory at Rocky Brands Inc in the third quarter.
But the Nelsonville, Ohio-based firm still improved profit by 11 percent, earning a net income of $5.2 million, or 70 cents a share, compared with $4.7 million, or 63 cents, in the same period a year ago.
The firm narrowly beat The Street, which was looking for earnings of 69 cents a share.
Net sales for the period ended Sep. 30, however, slipped to $71 million, from $74.8 million, due to the expiration of the Dickies license on Dec. 31, 2010 and military segment sales falling to $0.4 million, from $4.3 million a year earlier.
Wholesale sales inched up to $60.2 million, from $59.4 million. In particular, Western sales increased 11 percent on higher demand for both Durango and Rocky branded product. Meanwhile, retail sales fell marginally to $10.3 million, from $11 million.
Inventory increased 25 percent to $78.9 million, as the result of an increase in cost per unit as well as an increase in units.
Gross margin slipped 40 basis points to 36 percent, primarily due to an increase in product costs, the firm said.
David Sharp, president and CEO of Rocky, said in a statement, “We were particularly pleased with the performance of our commercial military business. This sales initiative has surpassed initial expectations as the product line has quickly gained traction within the military community.”
“We are optimistic about the current pace of our overall business and continue to be excited about the longer-term growth strategies we are developing for our brands,” he added.
Rocky ended the quarter with $3.3 million in cash and cash equivalents and long-term debt of $60.1 million.