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Rocky Brands: EPS +131%, At 10x P/E, Stock Is Still Attractive With Significant Upside Potential

Aug. 04, 2021 2:00 PM ETRocky Brands, Inc. (RCKY)7 Comments


  • 2Q21 net sales up 134.2% YoY and adjusted net income up 131.2% YoY.
  • Demand for their brands has remained robust.
  • Adjusted gross margins improved 270bps YoY.
  • Accretive Honeywell footwear brands acquisition aided growth in financials.
  • Stock up 150% since our initial recommendation in August 2020 and we still expect significant upside.

Sunny day at hiking adventures
hobo_018/E+ via Getty Images

Acquisition Drives 2Q21 Earnings

Rocky Brands (NASDAQ:RCKY) reported 2Q21 financials with revenues up 134.2% YoY driven by strong demand, and the Honeywell footwear acquisition. Both wholesale and retail channels demonstrated good traction in net sales, up 195.0% YoY and

Income Statement ($ thousand)                                             FY 2018         FY 2019          FY 2020        FY 2021E        FY 2022E        FY 2023E        FY 2024E

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Comments (7)

rjm22 profile picture
(From merion road investor letter)

While not core to the thesis, management believes that they have a tremendous opportunity to build
out the XTRATUF brand that came over with the acquisition. XTRATUF is a waterproof shoe brand that
dates its origins to the Alaskan fishing industry. Even though consumers may not demand the
performance characteristics of such a technical shoe, they do want authenticity. And XTRATUF screams
authenticity. RCKY management has been pleasantly surprised to see just how much demand there is
for this line. In fact, they have been refusing to open new accounts to protect the brand and manage
supply. A quick search for top men’s rain boots of 2021 yields the following results:
 GQ: XTRATUF Legacy Chelsea Boot
 NY Times: XTRATUF Ankle Deck Boot
 NYMag: Timberland White Ledge Mid Waterproof Ankle Boot
 Business Insider: XTRATUF Rubber Deck Boot
A search of ecommerce sites yields similar results. XTRATUF has strong ratings and is consistently
sought out by consumers. While all of this bodes well for the core business, it does pose the question of
how else to capitalize on this opportunity. Right now the company does very little outside of shoes and I
would not be surprised to see them start testing the waters in ancillary products.
In any case the company is trading at about 7x EBITDA and 9x FCF once integration is complete. At 9x
EBITDA (which accounts for the higher quality “distribution” business hidden within their retail
segment), the company would be worth about $70. If you are willing to look out a few years, I think
there should be a pretty clear path to over $100, or roughly a double from current prices.
China, shipment issues, rising interest with debt... i see problems
My choices today are cash in RCKY and switch to BOOT or hold on.
Read the call transcript and read the article.
I am going to hold on.

wow, long big 5, tremendous growth gets body slammed...hmmm
dpen1000 profile picture
getting murdered post earnings
edit: I hope you are right, I am pretty long this sucker
rjm22 profile picture
Why the heck are we down 13% today?
Value Investment Principals profile picture
@rjm22 Likely because of the QoQ drop in EPS
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