David Sharp
Analyst · B. Riley. Please go ahead
Thank you, Brendon. Joining me on the call today is Jim McDonald our Chief Financial Officer. Our most recent results represent the third consecutive quarter of double digit earnings growth on a year-over-year basis. The adjustments we’ve made to our operating structure over the past several years allowed us to achieve a 30% increase in earnings on a slight less than 1% decrease in sales for the second quarter. As we expected, topline growth for the first half of the year was challenging, due to tough comparisons created by some large, one time selling events in the quarter last year. These were principally a seeding program with tractor supply which expanded our assortment at this unemployment account and a large onetime shipment to a foreign country for military goods. Compounding the issue of these tough comparisons and as we have reported for several quarters, changes in the U.S. Army authorized footwear regulations, precious growth of our commercial military business. These headwinds were offset by strong double digit growth of our hunting boot category and more than doubling of contract military sales and the relatively continuous strong performance of our Durango brand. I’m going to walk through each of our brands and channels and outline why we are confident that despite the fiber sales trends during the first six months of 2015 we are poised for accelerated growth over the remainder of the year. Starting with wholesale. Sales of work footwear our largest categories were flat with the year ago. Led by Georgia boot, we experienced solid sell through many of our core independent accounts which led to filling orders during the quarter. Unfortunately this was offset by softer than expected sales with several larger national accounts where traffic during the quarter appears to have been challenging consistent with overall retails and trends [ph]. The good news is that inventories in the channel are very clean especially our insulated work boots following a cold winter throughout the eastern half of the United States. Moving onto Western, Durango brand sales increased to high single digits which comes on top of the mid 20% gain in the year ago quarter. In general, the brand continues to experience healthy gains across its retail distribution network as western fashion trends remain very relevant with today’s consumer. Our Rebel, Lady Rebel and little Durango collections are resonating with a broad audience, driving solid sell through at key retailers like Boot Barn, Academy-Sports and Cabela's. Western sales were partially offset by the product seeding program we ran with tractor supply during the first half of last year and a slight decline in Rocky brand of western footwear which was also up against a tough comparison due to a sizeable closed out order a year ago. We’re pleased to report that we’ll begin shipping Bealls Department Stores, a Florida based retailer in Q3. We are online with them, have displays with inventory in six stores as an opening test, and a visual presence in all stores with display materials that direct the purchase via Bealls in store online kiosks. And regarding Rocky Brand and Western Boots, retailer response to Rocky’s new fall holiday 2015 collection has been very positive, the majority of which we’ll ship in Q4. Now to Hunting, which delivered our strongest performance in the quarter with sales growth of 19%. It’s great to heading for the key hunting season with such strong momentum. As we said last quarter, the cold weather earlier in the year helped drive sell through of insulated water proof boots setting us up for a solid restocking situation ahead of the fall season. That is what we experienced during the second quarter and we are now well positioned with new products and traditional best sellers to meet demand and chase re-orders and season that of key accounts such as BassPro, Cabellas, denims and boot box [ph]. Turning to commercial military, sales were almost $3 million less compared with a year ago with the decline due primarily to the impact on demand for our popular C4 and C5 Lightweight boots. These styles were deemed unserviceable in the middle of last year due to changes in the Army’s wear and appearance regulations. This affected all manufacturers not just us. During the past several months we’ve been working hard to overcome this obstacle through the developments of our new Rocky Lightweight boot which boasts a rugged, yet lightweight platform and its’ over compliant with all Army uniform requirements. The RLW launches next quarter and we believe it will eventually more than fill the void created by the discontinuation of C4 and C5 boots. Also boosting our outlook for this category was the recent transition to a new operational camouflaged pattern that aligns with the new military uniform introduced from July the 1st which will benefit sales of our flagship S2V boot and new RLW in Q3. With regard to Creative Recreation, we continued to make steady progress building a business for the long term that is rooted in great product and quality distribution. The impact of the brands new sales force has been very positive in terms of expanding relationships with existing partners such as Nordstrom and Journeys and testing new accounts including Express and GSW this fall and opening up new international markets via new distributors. The spring 2015 product line is performing well led by The Santos, a new style that is selling through on a weekly basis in excess of 50% to several key retailers. Looking ahead, the early reactions of the Spring 206 [ph] line which will begin shipping in Q4 is providing us with increased optimism about the top line opportunities we believe exist for this business. Turning to our retail segment, we saw a nice improvement in our B2B channel during the quarter as we re-established an important customer we have previously serviced under our old mobile store operating model. At the same time, we continued to make important enhancements to our infinite based direct ship platform to drive higher sales through existing customers. These included one, upgrading our custom fit size, to be mobile responsive allowing for a seamless ordering experience regardless of the device consumers use to interact with our brands, two, implementing a series of health videos on our custom fit websites and three, publishing a series of white papers focused on occupational safety. We ended the second quarter with 760 installed CustomFit Kiosks and remain on schedule to end the year with a 1000 installations. With respect to our direct consumer operation as you will recall, the first quarter got off to a slow start due in part to some ineffective paid advertising programs. The team reacted quickly and was able to rectify the situation and I’m pleased to report that organic sales trends across our branded e-commerce websites are again heading in the right direction with increases year-over-year. We remain very confident that our enhanced e-commerce websites supported by more robust software platforms provide us with meaningful by margin growth opportunities in the coming years. In summary, the first half of the year played out much like we expected it to. While our top line was a bit softer than we planned due to some mixed sales opportunities created by the west coast or [Indiscernible] [5 0:42] we delivered strong earnings growth in the face of challenging comparisons highlighting the power of our business model. The good news is that the temporary headwinds that we recently faced are now behind us and our top line comparisons get easier as we head into the second half of the year. Therefore we are confident that we could increase sales mid single digits during the back half of 2015. Jim will now review the financials. Jim?
