RCKY · Rocky Brands, Inc.

Rocky Brands’ Q1 2026 results reflect strong top-line execution offset by acute margin compression driven almost entirely by $7.1 million in incremental tariff-related sourcing costs — a quantified, transitory headwind explicitly cited by management. While net sales rose 9.1% year-over-year to $124.4 million, gross margin contracted sharply to 36.5% (down 470 bps), dragging income from operations down 58.2% to $3.6 million and net income down 74.5% to $1.3 million. Segment-level performance reveals resilience: Retail sales surged 16.5%, Contract Manufacturing jumped 25.0%, and Wholesale grew 4.8% — confirming broad-based demand across channels and brands including XTRATUF, Muck, and Georgia Boot. Management attributes the gross margin decline solely to tariff impacts, noting mitigation efforts — price increases, sourcing diversification, and internal manufacturing leverage — partially offset the burden. Critically, leadership states the tariff effect begins to ease in Q2 2026 and projects a return to gross margins in the low 40% range and improved profitability in the second half, anchoring investor expectations to a clear, near-term inflection. Balance sheet discipline is evident: total debt declined 5.0% year-over-year to $122.2 million, and inventories fell 1.6% to $172.6 million, suggesting effective working capital management despite margin pressure. The earnings release serves as both a near-term caution on tariff volatility and a medium-term confidence signal on operational levers and pricing power.