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Rocky Brands: If the boot fits, wear it

Today's Financial News - Posted October 23, 2009

Rocky Brands: If the boot fits, wear itIt is a tough market when consumers aren’t willing to spend. But Rocky Brands (NASDAQ:RCKY) proves it has the right stuff when times get tough and strong action is needed.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): In order to survive in an economy where spenders are as uptight as Oprah at a Weight Watchers’ convention, a company needs two things: strong fiscal management and one heck of a brand name.

Rocky Brands (NASDAQ:RCKY) is proving to its shareholders that it has both.

Shares of the boot maker are up by nearly 20% today on news that the company just put a strong third quarter into the history books. Even though sales were down nearly $6 million compared to last year at this time, the company managed to record a bottom line significantly higher than a year ago.

During Q3 2009, Rocky sold $66.6 million worth of its popular footwear, versus $72.5 million in the year-ago period. It translated those sales into $4.4 million in profits, more than 50% higher than last year’s $2.9 million.

The positive results come thanks to strong brand loyalty and tight fiscal management. With a nasty consumer-based recession forcing shoppers to cut their spending, Rocky was charged with concentrating on its key products and stretching every dollar of cash flow to its max.

Bootstrapping pros

The company’s chief executive, Mike Brooks, made some interesting comments on the results, but a couple of lines stood out.

“…we began to see some stabilization of our sales base with several of our wholesale categories – Hunting, Western, and Duty – reporting positive gains,” Brooks said.

That is strong evidence that consumers are at least popping their heads out of the trenches. As history has shown, the first out of the foxholes will tend to gravitate to well-known, high-quality brands. That is good news for Rocky.

Another line, “With inventories at retailers relatively clean, we are optimistic we will continue to benefit from a higher frequency of reorders and we are confident that we can deliver improved profitability year-over-year during the fourth quarter,” is good news for almost all retailers.

The key to forward progress is refilling storeroom shelves. With inventories hitting baseline levels, demand will be much more predictable and static. We won’t see quarters of negative growth, followed by strong “re-filling” periods.

For Rocky and its strong cash-flow management skills, this predictability will lead to market-beating returns. Today’s strong share price gains are proof of the potential.

Of course, with a market value of just $42 million and only 20,000 shares trading on average each day, the stock is ripe with volatility and speculation, but on a long-term basis it offers plenty of reward.

Keep an eye on the company, and if it suits your taste buy on dips. Anything below $7.25 is a downright bargain.


Next Article: TFN eNews 10/23/2009: This is great news for investors!

Posted by Andrew Snyder · Filed Under Featuring..., US Stocks and Markets 

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