RCKY - Rocky Brands stock reels as increased costs cut into profits

Rocky Brands ( NASDAQ: RCKY ) shares slid nearly 20% on Wednesday as cost pressures caused a steep drop in profits.

In reporting its second quarter results, the Ohio-based footwear company posted adjusted EPS of $0.34, amounting to only about one-third of figure posted in the year prior. The bottom line report also missed analyst estimates by a very-wide margin, falling $0.46 below consensus.

“While we didn’t experience any noticeable sales slowdown due to growing inflation and general economic uncertainty during the first half of 2022, our results were negatively impacted by higher than expected costs throughout our supply chain,” CEO Jason Brooks said.

He explained that higher logistics costs as well as price increases from third-party sourcing factories in Asia were particular adverse impacts on the bottom line.

While Brooks noted that the company continues to take pricing action to offset these impacts, the cost increases clearly outpaced these maneuvers in the second quarter. As such, the company anticipates raising prices once again, effective September 1.

Elsewhere, inventories ballooned in the second quarter to to $287.8M, more than doubling from  $143.5M in the year prior.

“The year-over-year change in inventories was driven by the distribution and fulfillment challenges experienced in the second half of 2021 and overall cost increases and strong sales growth, combined with additional inventory on hand as the result of increased transit times,” the company explained, noting that inventories are actually down slightly as compared to the first quarter of 2021.

Shares fell 19.81% on Wednesday.

Read the earnings call transcript .

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