Rocky Brands books disappointing earnings

Jennifer Schonberger | Oct 23, 2007 12:08pm EDT | Comment

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Investors are sending shares of Rocky Brands, Inc. (Nasdaq: RCKY) spiraling downward to a new 52 low today after the footwear manufacturer reported disappointing earnings for its third quarter and downwardly revised earnings for the full fiscal year.

For the three months ended Sept. 30, the Nelsonville, Ohio-based company recorded net income of $1.1 million, or $0.21 per diluted share, compared with net income of $4.2 million or $0.76 per diluted share for the third quarter last year. Three analysts surveyed by Thomson were calling for earnings of $0.91 per share.

Rocky attributed the earnings disappointment to significant pricing pressure and an increase in product costs. As a result, the company’s gross margin was 550 basis points lower than anticipated.

Additionally, Rocky said it decided to increase its retail operating expenses to capitalize on “near-term prospects created by the bankruptcy of a key competitor.”

Net sales increased 5.4% to $82.3 million to clock inline with the consensus of two analysts polled by Thomson of $81.95 million. The shoe maker booked sales of $78.1 million for the third quarter of 2006. The firm said the increase in sales was primarily driven by a 25% increase in retail revenues, coupled with a slight increase in wholesale sales.

Looking to the full year, Rocky now anticipates higher revenues, but lower earnings. The company said based on actual third-quarter results and better visibility into the fourth quarter, it now expects net sales for fiscal 2007 to be approximately $280 million, compared with its previous guidance of approximately $277 million. The company predicts earnings per share of approximately $0.30, compared with previous guidance of approximately $1.16. Three analysts surveyed by Thomson were gunning for earnings of $1.07 per share on revenues of $ 280.53 million.

Shares of Rocky Brands (RCKY) tumbled 24.78%, or $2.30, to $6.98 at 11:49 a.m. ET. Shares of Rocky Brands have been trading in the range of $6.72 to $19.23 for the past 52 weeks.