Really pleased to welcome back Rocky Brands. Rocky's been coming to the conference, I think, since 2004. Today we have, as we did last year, Jason and Tom, CEO, CFO. They've got a new presentation they're going to run through on the business, and then if there's time, maybe do a few questions. If you have questions, don't get them answered here. The management team does have a breakout this afternoon, so with that, I'll turn it over to Jason.
Great. Thanks, Brendon. Appreciate it much, and happy to be here again. This is our Safe Harbor Statement. Where are we at, Tom? You just moved really quick. We have a table of contents here. We're going to run through a couple of different things for you today and give you a little bit of information about our company. So this is a little bit about Rocky. We started back in 1932. The company was called William Brooks Shoe Company and moved forward a little bit there. In 1993, we did go public. We are under RCKY in the Nasdaq. We did an acquisition in 2005 of EJ Footwear. EJ is actually the oldest footwear company in the United States, Endicott Johnson. And that's when we acquired the Georgia Boot, the Durango, and the Lehigh business. We'll talk a little bit more about the Lehigh business later on.
But this pretty much doubled us in size. We were about a $100 million business and went to about a $200 million business back in 2005. And then fast forward, I became CEO and Tom CFO in 2017. And then in 2021, we were able to do another acquisition from Honeywell, which was the XTRATUF, Muck, Ranger, NEOS, and Servus. We do have three different segments. We have the wholesale segment, which is our business to retailers like Bass Pro and Boot Barn, Cavender's, stuff like that. We have our retail segment, which our Lehigh business falls under, and that is B2B business. So we sell product to other manufacturing companies like Whirlpool. Again, we'll get into more detail on that. And then contract manufacturing would be what we do with our military contracts.
We also do a little bit of private label with some of our wholesale customers. We do have three owned manufacturing facilities, one here in the U.S., one in the Dominican, and then one in mainland China. These are the portfolio of brands that we have. The Muck brand was the acquisition that we just did in 2021, which is a rubber neoprene type boots. Georgia Boot is the EJ purchase back in 2001, 2005. Durango is more of our Western brand. Rocky is our heritage brand. Lehigh, again, is our B2B business. XTRATUF is another rubber boot business. Ranger is more of kind of a pac boot cold weather business. Our sales mix, you'll see here, 70% of our business is wholesale. That would be us selling to a retail partner.
That could be a key account like Tractor Supply, Bass Pro, Cabela's, Boot Barn. Or we also do a tremendous amount of business with our independent mom and pops. We have thousands of retailers across the country and then around the world as well. Our retail department is 27% of the business, which is our own website. So we have Rocky, Georgia, Durango, Muck, XTRATUF , and Ranger.
Ranger.
Ranger. Those retailers are dot-coms. We sell all there. Then also under retail is the Lehigh business. Manufacturing contract is 3% of our business. Here are the categories you'll see that we break down in. Pretty much all of our brands are categorized under the work category, right? So 45%. Outdoor is about 30%. That falls under two different, what I call, two different outdoor categories. You might find hunting outdoor in there, right, for Muck and Rocky. But then XTRATUF outdoor is going to be more of your fishing, camping, outdoor activities like that. Durango and Rocky we have in our Western. Then service is our military and public service like police, fire department. It's about 8%. Then apparel is maybe about 2% of the business.
Then I'll touch on the Muck brand here. The Muck brand traditionally was the creator of the rubber neoprene boot. These are three styles on the board here. The 15-inch functional rubber boots worn in a lot of farm and ranching, but then also we have the outdoor hunt category. Then not featured on here, but we're also dabbling into kind of the gardening space. Thinking of like Ace Hardware and boots that people would hobby as chicken farmers, things like that. The categories, again, are work and outdoor. Then here's just a list of some of the key customers that you might suspect to see the Muck brand at. The Muck brand by channel is really predominantly a wholesale business, about 17% of that business being DTC, which would be our original muckboot.com.
This just shows you that we have an area for growth as we can try to drive sales to our direct-to-consumer websites.
We'll touch base a little bit on the Rocky brand. This is the most diversified brand we have. We touch on the military side. You'll see there our S2V boot, which is a really popular boot with our service departments. Just to the right of that is our AlphaForce, which is something you're going to find in the police departments, maybe even fire departments. We also do the outdoor hunting area. We do a little bit of casual. That's the Outback. It's a Gore-Tex waterproof boot. We also touch on Western product. You'll see the categories there to the right where we hit the most categories within this. Some of the key customers, AAFES is actually, I think AAFES is the largest retailer in the world.
They sell on military bases all around the U.S. and actually all around the world, not just the U.S. Sportsman's Guide, Bass Pro Shops. Grainger is a really great partner of ours. And they sell a lot of our product to their end users as work boots as well. You'll see here that from a wholesale standpoint, it's about 87% of our business. That's, again, direct to our retail partners. And then about 13% is our DTC or our rockyboots.com .
I'll touch on Georgia here. Our Georgia Boot brand is predominantly a work brand. This brand is regional in that it is very popular in the southeastern United States and then also in the Pacific Northwest. The brand originally out of the logging industry. The boots traveled with the loggers as they went to the Pacific Northwest. But there's also some lifestyle offerings like you can see here with the Romeo there. Plays just in the work category, and then you can see the key customers listed here as well. This brand actually only has 10% of its business in DTC. And so I think this speaks a little bit to the demographic of the consumer that this plays to. And so you think about work boots, there's always a necessity to have your work boots to show up to work the next day.
So a lot of times we find that individuals are buying that product when the boot fails and they have to go to the store that day. So an opportunity for us to certainly sell more direct-to-consumer. But there will always be a need for brick-and-mortar retailers when it comes to the work boot channel.
And then I'll touch on Durango. Durango is one of our fast-moving products right now. We're seeing another big uptick. If everybody's familiar with Yellowstone, we saw a nice move there. It kind of leveled off. And it seems like there's a new show out called Landman. If you haven't seen it, highly recommend it. A lot of good stuff going on around that. And pull-on Wellington work, Western kind of boots are becoming popular again. And we're seeing that in the marketplace. We saw a pretty nice uptick in Q4. You'll see the different styles here. All traditional kind of Western look, but they're still very functional. And so even though we categorize this as Western, I would tell you that it's Western work type product. So they are still working in these boots a lot.
We do have some boots that people might not want to go actually work in. Like the pair I'm wearing here is an ostrich. It's more like a $600 boot. And you wouldn't want to do a lot of oil fields in this. Again, key customers, Cavender's, Boot Barn's been a great customer, Tractor Supply, Academy. Again, as Tom mentioned in Georgia, really if you think about all our brands, 91% of this business is done DT or I'm sorry, wholesale, only 9% is DTC. So we have a big opportunity where we can continue to drive people to our own websites and grow that business, which I think could be really important for us. And it's obviously a more profitable way to do business. But our wholesale partners are really important to us and helped us build our brands as we have over the years.
To touch on XTRATUF, our XTRATUF brand in its origins is really a commercial fishing brand. If you look at the boot on the far left here, 15-inch rubber boot worn predominantly in Alaska commercial fishing. Everybody in the Deadliest Catch, for example, wears this product. We picked these boots up here because it kind of tells the story of how this brand has transitioned over the last 10 years or so. The commercial fishermen in Alaska would fish. In the off-season, they would go down to Florida and the Gulf Coast, and they would go fishing. What they would actually do is they'd cut the boot off, and they'd make the boot essentially shorter so it would be cooler.
The product team at XTRATUF went through and said, "Well, we can do that already, right?" They cut the boot off, and we made a 6-inch version of that boot. It has grown widely popular. We actually sell 4:1 the 6-inch ankle deck boots than we do the commercial fishing boot on the left there. As the popularity has grown beyond just commercial fishermen and charter boat fishermen, it has gotten more into the lifestyle, either recreational fishermen or even the lifestyle outdoor person. We've done fun collaborations like the Guy Harvey collaboration that's shown here. Guy Harvey is a big influential sport fish artist, if you will. We've seen big success with some of these collaborations. The really unique one is the one on the bottom here, the kids' boot, the pink boot.
We have seen this brand really transition from a predominantly male-focused brand, closer to 70%-75% of the brand when we acquired it in 2021. Today, about 50% of the product is male. Men are still dominant in the fishing space, but 50% of the product is now sold to women and kids, and this is our fastest growing area, and that correlates into where they're buying the boots, and as you can see here, the amount of DTC business is greatest for us in this brand, which is also where we have the most women shopping who are also probably the buyers for children's footwear as well, and so we're really excited about where this brand is going. We are hyper-focused on keeping it to its core, an authentic brand, if you will.
But as this product moves away from just fishermen and into middle America, we're adding things like fleece lining, insulated product as the boots are moving inland. And we're all seeing, if you were to look at a heat map for this brand, we're seeing sales in Jackson Hole and Denver and areas like that where people are taking their ski boots off or their snowboard boots off, and they're slipping these on. And so this is our fastest growing brand right now. It's doubled since we acquired it three years ago. And so we're excited to see where this brand goes. And you can see we're putting a lot of investment from a marketing perspective into XTRATUF as we go into 2025. The Lehigh business, Jason touched on this a little bit before. This is a B2B business.
We basically enter into relationships with companies that have some type of safety footwear need. And so the example we like to use is Whirlpool. If you work at Whirlpool and you make washers and dryers, the employees get a subsidy to buy boots every year. And so what we do is we create a custom website. It looks and feels like that employer's company website. And those employees are able to log on, and it is proprietary to us. They are able to purchase their boots. They can buy our boots. And we hope they buy a Rocky Georgia Durango. But they can also buy other brands like Timberland, Ariat, Justin. And we were able to take those vouchers electronically, use credit cards for differences, ship the boots directly to that employee, free shipping, free returns. And this has been a business that's been growing.
Low double digits for us the last few years. We've seen recent success, particularly in the last six months as people are getting more and more accustomed to buying products online. Important to call out, a lot of the customers that we acquire through this business or capture are being serviced through the truck model. There's a whole industry of trucks out there that drive up to these facilities and try shoes on, and we've seen recent success in knocking some of those competitors out of the way with our digital format. This is just a list of some of the more national key accounts that we serve through our Lehigh business.
What we found is that bigger multi-location national accounts are really in our sweet spot because we're able to offer all their employees, all their facilities, regardless of their geography, the same level of service, the same product offerings. We can offer consolidated billing. And one of the other things that we've really leaned in on is providing back those safety managers or HR, whoever's in charge of safety for these corporations. We can give them data and reporting, right? So if they have a claim, if somebody gets hurt, we can prove that, hey, this individual got their free pair of boots from the employer. Just to touch on a little bit of our operational footprint, the blue boxes here, we distribute all of our product in the United States through two distribution centers, one in Ohio, one in Reno, Nevada.
The vast majority of 70-75% of our product comes out of the Ohio distribution center. If you think about where our customers are, we're much more East Coast than we are West Coast. And so we'll continue to see that in 2025. The red boxes here point to where we have our owned and operating manufacturing facilities. We're a little unique in that we still make our own boots. We still make about 30-35% of our products. The rest of it comes from sourcing partners. As you can see the stars here, those stars, there's some that have been added since the last time we spoke here. India, particularly, is growing. And given all the concerns around China and tariffs, we are diversifying outside of China as well. Important callout, I think there's been a lot of conversation about tariffs.
And more recently, we've seen conversation around a 10% incremental tariff coming out of China. And the fact that we own our own manufacturing facility in China has raised a lot of questions. And so one important thing to note is that even with a 10% tariff, we can still be very competitive with our manufacturing facility in China versus buying it somewhere else because that person or that company we'd be sourcing from would have their own markup on it. So we're going to continue to mitigate and diversify out of China, but just an important callout for our own facility in China. Just some financial highlights. As you can see, the big acquisition in 2021 doubled our size overnight. 2022 was a high point for us, a couple of callouts. During that transition, when we did the acquisition, we had some distribution challenges.
Jason and I have talked about it a lot. But the important callout, about $50 million of sales from 2021 rolled into 2022. And then also we divested, as Jason pointed out earlier, two of those brands was representing about $30 million of sales. And so that was part of the big decrease in 2023. 2023 also was challenged just like everybody else in retail. A lot of our retail partners were over-inventoried, particularly our key accounts. And so they were pulling back as they right-sized their inventory. And it was a big strain and challenge on our wholesale business. And so that kind of explains the decrease in sales. But as you can see, our income from operations actually grew from 2022 to 2023. So we were more profitable. And we were more profitable from an operating standpoint. Net income is down.
A lot of that was driven by debt levels. So as we got over-inventoried and everybody else got over-inventoried, we had to draw down on our revolver pretty meaningfully to pay for those boots. And so as our debt has come down, we've seen a little bit of relief from interest rates. We also did a refinance in April of 2024, which really lowered the cost of our debt as well. You can see the inventory decrease in the balance sheet data below as well and the decrease in debt. This is just kind of those same numbers in chart form. So I won't spend too much time on that, except I do want to call out that the ability for the team here at Rocky to bring inventory down $130 million while expanding our gross margin.
Part of that was a little bit of help from container rates coming down. But also with us being a functional footwear company, we do not have to discount our product to move through it. It happens over time because our product is consumed. We're not a fashion brand that's trying to get out of flip-flops before fall comes and vice versa in the spring. And so the black rubber boots, the brown leather boots, we are simply able to weather that storm and not have to get promotional to bring that inventory level down. For our 2024 outlook, we put net sales between $450 and $460 million. I know that's slightly less than what I showed you for 2023. There was about $30 million of non-recurring revenue that we had in 2023 that we knew we walked into 2024 knowing we weren't going to have.
That represented one of the brands that we divested. Also, we continued to make product for the buyer of one of those brands for about nine months. And so we had sales that we knew we weren't going to anniversary as we got out of producing that product for them. And then we also made a go-to-market change in Canada. And so we used to have a team in Canada, a distribution center in Canada. We were selling directly to retailers in Canada. And so while we pulled back on that, we now go through a distributor model in Canada where we're getting a royalty, which has proven to be a much more profitable way for us to sell product in Canada. So we knew we were going to be a little bit smaller because of that non-recurring revenue, but ideally more profitable.
Gross margins, we've guided to be consistent with LY around 39%. Then a little bit of modest leverage in 2023, really because we're trying to drive that growth in our brands, particularly in the XTRATUF and Durango brand. So we've invested in there. If you look back to 2023, given where our debt financing was, we were pulling back everywhere we possibly could. Some of it was probably short-term focus. Now, as we got into 2024, focus on long-term growth and making some of those reinvestments in marketing and also people. An important callout with that debt refinance and the pay down of debt, about a $5 million year-over-year reduction in interest expense. Just to recap on some of the investment highlights, we've got a diversified brand portfolio.
While some brands will win, some brands, they can offset some losses in the other brands. We also have a diversified channel mix as Jason touched on. We sell to a lot of brick-and-mortar retailers who are also selling a lot of product online, but we also have our own distribution, or I'm sorry, our own DTC model through our websites and our Lehigh channel. We own our own manufacturing that allows us to be more nimble and flexible, and so as the world gets crazy with changes in supply chain, with either tariffs or the container rates that happened a few years ago, we can flex more than a lot of our peers. We also pay a quarterly dividend of about 3% yield right now, and then we wanted to highlight the significant improvement on the balance sheet.
We've reduced our debt by over 50% and our inventory by 30% over the last year and a half.
Yeah. Yeah. We've got a couple of minutes. I realize I'm not miked up. So you talked about the XTRATUF brand, fastest growing brand, probably the biggest opportunity for the business or the company at the moment. Maybe dig a little deeper in as we go from 2024 to 2025, what's going to drive that growth? I know you're reaching a larger consumer. Are you opening a lot of new doors with that brand, or is it increasing shelf space? And then kind of how do you manage, maybe not growing too fast, over-distributing the product, keeping the brand hot, but again, not kind of taking a near-term view on growth for that brand?
Yeah, good question, Brendon. I think it's absolutely our hottest brand.
We have to navigate being careful to not over-distribute it. We want to be careful about the retail partners we're in. Obviously, DTC is really important there. So we'll continue to drive our business there. But as Tom talked about, women's and kids is really important in that business. And so we'll continue to market and advertise in that area and really support the retailers that we have today in taking more shelf space, right? Adding more shelf space there. West Marine has been a wonderful partner there because not only do they sell it from a more fashion standpoint, but they sell it from a functional standpoint because a lot of the people that shop there are coming in every six months to get something for their boats, to fix their boats, and then they need new shoes too. So it really works out well there.
The Bass Pros of the world, the Dick's Sporting Goods, REI has gotten really pretty hot on the brand. And then we'll look at the Nordstroms of the world and where does that kind of fit in or doesn't fit in. But we got to be really particular. And one of the things, I don't know if we touched on it, but we definitely missed some sales in 2024 by not having the right inventory. So we will be making more investments in the right inventory in 2025 to capture those sales.
And then along those same lines with XTRATUF , maybe Durango too, where you're putting some of these marketing dollars to work. Where are you investing that? Is that social? Is that video? Is that point of sale? Maybe it's all of it.
But maybe talk to some of your marketing programs that you guys are investing in that you think will drive growth in those brands or just any of your brands?
Yeah, I just want to, I like to treat our brands, they're not our kids, right? So we do not have to treat them equally. And so XTRATUF is definitely getting a bigger proportion of the dollars that we want because we really see this as a brand that we can grow and grow fast.
Yeah, I mean, I think strategically a lot of the investments, but to no surprise, are going in through kind of social media, digitally going after customers as well. We've also had a lot of success partnering with some of our larger retail partners and driving collaborative type marketing in specific regions.
But with XTRATUF too, you're starting to see more collaborations that we're going to be rolling out with. We're trying to get that person to buy the next pair, right? And so the Guy Harvey collaboration is good. We have a collaboration coming out in the fall with Sesame Street for kids, which we're really excited about. And then also we have the Salmon Sisters, which has been a wildly successful collaboration over the last couple of years for the XTRATUF brand. So collaborations, more digital spend. We just need to get our brands in front of more customers, and the boots will speak for themselves. So once they get them on, we know they'll buy them again.
Yeah, and Tom talked a little bit about it. What we're seeing is it coming inland, right?
People are going, "Man, not only is this boot great on a boat or great around the waters and the coasts in Florida and New York or wherever, but we're seeing it now in skiing areas." And so we're having to put insulation in them. We're having to fleece line them. And people are using them around more snow and more rain boots. And so I think that's going to be really exciting to see it come inland because the main sales right now are on the coasts.
All right, well, we're out of time. So I want to thank you both for coming back and sharing the story with us today. Absolutely.
Thanks for having us.
Thank you.