ROCKY BRANDS, INC. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. BUSINESS OVERVIEW We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger and the licensed brand Michelin. Our portfolio of brands is organized into three reportable segments in which our product is distributed: Wholesale, Retail and Contract Manufacturing. The reportable segments are targeted around six distinct product lines: work, outdoor, western, duty, commercial military and military. We frequently experience significant seasonal fluctuations in our business as many of our footwear products and product lines are used by consumers in adverse weather conditions. Accordingly, average inventory levels have been highest during the second and third quarters of each year and sales have been highest in the last two quarters of the year. Our business is subject to a highly evolving and everchanging macroeconomic environment, including changes in tariffs, taxes and industry changes. In 2025, the U.S. government announced significant additional tariffs on products imported from various countries, including those countries where we primarily source our products. To help mitigate the potential adverse business impacts these additional tariffs may have on our business, we began to implement sourcing shifts to leverage our own manufacturing facilities in the Dominican Republic and Puerto Rico. Over the last twelve months, we have seen a shift in our total mix of sales, as the growth or our Retail segment outpaces the growth in our Wholesale and Contract Manufacturing segments. Growth in our Retail segment was driven in part by an increase in our Lehigh CustomFit business as we expand our customer base and product offerings. Additionally, there has been an uptick in sales on our owned e-commerce websites and third-party marketplaces as we put an emphasis on digital marketing and as spending among consumers continues to shift to online retailers. During the third quarter of 2025, we experienced an increase in net sales over the third quarter of 2024. This increase was attributable to an increase in net sales across all three of our reportable segments, Wholesale, Retail and Contact Manufacturing. Overall gross margin improved over the past year, driven by an increase in both our Wholesale segment gross margin and our Retail segment gross margin. The increase in Wholesale gross margin as a percentage of net sales compared to the prior year period was largely due to favorable shifts in product mix and price increases. The favorable shift in product mix was largely attributed to an on-going shift in our branded net sales mix, with our rubber-boot brands delivering stronger growth relative to the rest of the brands in our portfolio. The increase in Retail segment gross margin was largely driven by price increases during the third quarter of 2025. Our operating expenses as a percentage of net sales increased for the three and nine months ending September 30, 2025 compared to the three and nine months ending September 30, 2024 due to an increase in outbound logistics costs, an increase in Retail sales, as well as an increase in marketing investments. Sales under our Retail segment are generally subject to higher selling costs relative to those costs incurred under our Wholesale and Contract Manufacturing segments. In addition to the increased costs associated with Retail sales, we made incremental investments in traditional and digital marketing during the three and nine months ended September 30, 2025 to drive sales growth. Interest expense declined for the three and nine months ending September 30, 2025 compared to the same periods in 2024 due to continued debt repayments over the past twelve months, which have reduced the overall outstanding principal balances, as well as a decrease in interest rates. The increase in inventory as of September 30, 2025 compared to September 30, 2024 was primarily due to an increase in cost of inventory as a result of the tariffs imposed in 2025. THIRD QUARTER 2025 FINANCIAL HIGHLIGHTS COMPARED TO THIRD QUARTER 2024 ● Net sales increased 7.0% to $122.5 million ● Gross margin increased 210-basis points to 40.2% ● Inventories increased 12.7% to $193.6 million ● Total debt decreased 7.5% to $139.0 million YEAR TO DATE 2025 FINANCIAL HIGHLIGHTS COMPARED TO YEAR TO DATE 2024 ● Net sales increased 5.1% to $342.3 million ● Gross margin increased 220-basis points to 40.8% ● Operating income as a percentage of net sales increased 120-basis points to $27.6 million ● Net income increased to $15.8 million, or $2.10 per diluted share RESULTS OF OPERATIONS The following tables set forth, for the periods indicated, information derived from our Unaudited Condensed Consolidated Financial Statements. The discussion that follows each table should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements as well as our Annual Report on Form 10-K for the year ended December 31, 2024. Three Months Ended Nine Months Ended September 30, September 30, ($ in thousands) 2025 2024 2025 2024 Net sales $ 122,540 $ 114,554 $ 342,260 $ 325,718 Cost of goods sold 73,264 70,908 202,695 199,886 Gross margin 49,276 43,646 139,565 125,832 Operating expenses 37,541 33,575 111,968 103,271 Income from operations $ 11,735 $ 10,071 $ 27,597 $ 22,561 Net sales increased to $122.5 million in the third quarter of 2025 compared to $114.6 million in the third quarter of 2024. The increase in net sales in the current year quarter compared to the prior year quarter was due to an increase in net sales across all of our reportable segments: Wholesale, Retail and Contract Manufacturing. Gross margin in the third quarter of 2025 was $49.3 million, or 40.2% of net sales, compared to $43.6 million, or 38.1% of net sales, in the third quarter of 2024. The increase in gross margin as a percentage of net sales was attributed to price increases and a favorable shift in product mix, fueled by an on-going shift in our branded net sales mix with our rubber-boot brands delivering stronger growth relative to the rest of the brands in our portfolio. Operating expenses for the third quarter of 2025 were $37.5 million, or 30.6% of net sales, compared to $33.6 million, or 29.3% of net sales, for the third quarter of 2024. The increase in operating expenses as a percentage of net sales was due to higher outbound logistics costs along with higher selling costs associated with the increase in Retail sales, and incremental investments in marketing. Income from operations for the third quarter of 2025 was $11.7 million, or 9.6% of net sales, compared to $10.1 million, or 8.8% of net sales, in the year ago period. The increase in income from operations was primarily driven by the increase in gross margin for the three months ended September 30, 2025, compared to the year ago period. Net sales for the nine months ended September 30, 2025 increased to $342.3 million compared to $325.7 million for the nine months ended September 30, 2024. The increase in net sales was due to an increase in Retail segment net sales for the nine months ended September 30, 2025 compared to the prior year period, partially offset by a decrease in Wholesale and Contract Manufacturing net sales. Year-to-date gross margin for 2025 and 2024 was $139.6 million, or 40.8% of net sales, and $125.8 million, or 38.6% of net sales, respectively. The increase in gross margin as a percentage of net sales was attributable to increased Wholesale segment gross margins as well as an increase in Retail net sales which carry higher gross margins than the Wholesale and Contract Manufacturing segments. Operating expenses for the nine months ended September 30, 2025 were $112.0 million, or 32.7% of net sales, compared to $103.3 million, or 31.7% of net sales, for the nine months ended September 30, 2024. The increase in operating expenses as a percentage of net sales during the nine months ended September 30, 2025 compared to the year ago period was largely attributable to an increase in selling and logistics costs associated with an increase in Retail sales as well as an increase in digital marketing. Income from operations for the nine months ended September 30, 2025 was $27.6 million, or 8.1% of net sales, compared to $22.6 million, or 6.9% of net sales, for the same period a year ago. The increase in income from operations was primarily driven by an increase in gross margin in the current year period. 14 Table of Contents Three Months Ended September 30, 2025 compared to Three Months Ended September 30, 2024 Three Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) NET SALES: Wholesale $ 89,117 $ 84,033 $ 5,084 6.1 % Retail 29,518 26,771 2,747 10.3 Contract Manufacturing 3,905 3,750 155 4.1 Total Net Sales $ 122,540 $ 114,554 $ 7,986 7.0 % Wholesale net sales for the three months ended September 30, 2025 were $89.1 million compared to $84.0 million for the three months ended September 30, 2024. The increase in Wholesale net sales was due to increased demand across several key styles and brands coupled with a tariff related price increase. Additionally, as part of a strategic initiative, we continued to build upon the lifestyle component of our outdoor category to broaden our distribution and consumer reach. Retail net sales for the three months ended September 30, 2025 were $29.5 million compared to $26.8 million for the three months ended September 30, 2024. The increase was attributed to an increase in our Lehigh CustomFit business and third-party marketplace net sales. We experienced an increase in our Lehigh CustomFit business as we continue to make operational improvements to our CustomFit website and increase product offerings. Additionally, consumer spending among Lehigh CustomFit customers has continued to increase with improved subsidy utilization in the third quarter of 2025 compared to the third quarter of 2024. These factors have largely offset supply chain and tariff pressures. The increase in third-party marketplace platforms was attributed to increased presence within the marketplace space as well as price increases. Contract Manufacturing net sales for the three months ended September 30, 2025 were $3.9 million compared to $3.8 million for the three months ended September 30, 2024. The increase in Contract Manufacturing net sales was mainly attributed to an increase in private label sales as no additional contracts were awarded from the U.S. Military in the current year. 15 Table of Contents Three Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) GROSS MARGIN: Wholesale Margin $'s $ 35,180 $ 31,514 $ 3,666 Margin % 39.5 % 37.5 % 2.0 % Retail Margin $'s $ 13,825 $ 11,683 $ 2,142 Margin % 46.8 % 43.6 % 3.2 % Contract Manufacturing Margin $'s $ 271 $ 449 $ (178 ) Margin % 6.9 % 12.0 % (5.1 )% Total Margin $'s $ 49,276 $ 43,646 $ 5,630 Margin % 40.2 % 38.1 % 2.1 % Who lesale gross margin for the three months ended September 30, 2025 was $35.2 million, or 39.5% of net sales, compared to $31.5 million, or 37.5% of net sales, for the three months ended September 30, 2024 . The higher Wholesale gross margin in the third quarter of 2025 compared to the third quarter 2024 was attributable to a more favorable product mix an d price increases in the third quarter of 2025 compared to the prior year period. The favorable shift in product mix was largely attributed to an on-going shift in our branded net sales mix, with our rubber-boot brands delivering stronger growth relative to the rest of the brands in our portfolio. Retail gross margin for the three months ended September 30, 2025 was $13.8 million, or 46.8% of net sales, compared to $11.7 million, or 43.6% of net sales, for the three months ended September 30, 2024. The increase in Retail gross margin as a percentage of net sales was attributable to our third-party marketplace sales and e-commerce sales, which carry higher margins than our Lehigh CustomFit sales as well as price increases in the third quarter of 2025. Contract Manufacturing gross margin for the three months ended September 30, 2025 was $0.3 million, or 6.9% of net sales, compared to $0.4 million, or 12.0% of net sales, for the three months ended September 30, 2024 . The decrease in gross margin was driven by reduced economies of scale at our Puerto Rico manufacturing facility. Three Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) OPERATING EXPENSES: General and administrative $ 28,023 $ 25,467 $ 2,556 10.0 % Sales and marketing 7,825 6,483 1,342 20.7 Depreciation and amortization 1,693 1,625 68 4.2 Operating Expenses $ 37,541 $ 33,575 $ 3,966 11.8 % % of Net Sales 30.6 % 29.3 % 1.3 % Operating expenses for the three months ended September 30, 2025 were $37.5 million, or 30.6% of net sales, compared to $33.6 million, or 29.3% of net sales, for the three months ended September 30, 2024. The increase in operating expenses as a percentage of net sales was due to increases in outbound logistics costs and selling costs associated with a higher volume of Retail sales in the current year period as well as incremental marketing investments. Three Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) INTEREST EXPENSE AND OTHER: Interest expense $ 2,564 $ 3,328 $ (764 ) (23.0 )% Other income, net (71 ) (148 ) 77 52.0 % Total Interest Expense and Other $ 2,493 $ 3,180 $ (687 ) (21.6 )% Interest Expense and Other - net for the three months ended September 30, 2025 was $2.5 million compared to $3.2 million in the year ago period. The decrease in interest expense was due to lower debt levels as well as a decrease in interest rates. Three Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) INCOME TAXES: Income Tax Expense $ 2,030 $ 1,612 $ 418 25.9 % Effective Tax Rate 22.0 % 23.4 % (1.4 )% The decrease in our effective tax rate in the third quarter of 2025 compared to the year ago period was primarily due to the mix of earnings between the United States and our international subsidiaries. 16 Table of Contents Nine Months Ended September 30, 2025 compared to Nine Months Ended September 30, 2024 Nine Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) NET SALES: Wholesale $ 236,993 $ 232,082 $ 4,911 2.1 % Retail 95,905 83,288 12,617 15.1 Contract Manufacturing 9,362 10,348 (986 ) (9.5 ) Total Net Sales $ 342,260 $ 325,718 $ 16,542 5.1 % Wholesale net sales for the nine months ended September 30, 2025 were $237.0 million compared to $232.1 million for the nine months ended September 30, 2024. The increase in Wholesale net sales was due to increased demand across several key styles and brands. Additionally, as part of a strategic initiative, we continued to build upon the lifestyle component of our outdoor category to broaden our distribution and consumer reach. Retail net sales for the nine months ended September 30, 2025 were $95.9 million compared to $83.3 million for the nine months ended September 30, 2024. The increase in Retail net sales for the first nine months of 2025 was due to increased sales in our Lehigh CustomFit business, third-party marketplace net sales, and our own e-commerce website net sales. The increase in our Lehigh CustomFit business was attributed to a realignment of our sales organization in the first quarter of 2024, which allowed us to expand our customer base, positioning Lehigh for long-term growth starting in the latter half of 2024. Consumer spending among Lehigh CustomFit customers has also increased with improved subsidy utilization and an increase in average subsidy dollars in the first nine months of 2025 compared to the year ago period. We also experienced an increase in sales through third-party marketplace platforms and owned e-commerce websites in the first nine months of 2025 compared to the year ago period due to increased promotions and more competitive pricing on certain products as we continue to optimize our inventory position. Contract Manufacturing net sales for the nine months ended September 30, 2025 and 2024 were $9.4 million and $10.3 million, respectively. The decrease in sales during the current year period was due to no new contracts awarded from the U.S. Military in 2025, partially offset by an increase in private label net sales. 17 Table of Contents Nine Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) GROSS MARGIN: Wholesale Margin $'s $ 94,768 $ 85,977 $ 8,791 Margin % 40.0 % 37.0 % 3.0 % Retail Margin $'s $ 44,025 $ 38,719 $ 5,306 Margin % 45.9 % 46.5 % (0.6 )% Contract Manufacturing Margin $'s $ 772 $ 1,136 $ (364 ) Margin % 8.2 % 11.0 % (2.8 )% Total Margin $'s $ 139,565 $ 125,832 $ 13,733 Margin % 40.8 % 38.6 % 2.2 % Wholesale gross margin for the nine months ended September 30, 2025 was $94.8 million or 40.0% of net sales, compared to $86.0 million, or 37.0% of net sales, for the nine months ended September 30, 2024. The higher Wholesale gross margin in the first nine months of 2025 compared to the first nine months of 2024 was attributable to a more favorable product mix as well as the blanket commercial military order in the prior year period that elevated sales but carried a lower gross margin compared to other Wholesale sales. The favorable shift in product mix was largely attributed to an on-going shift in our branded net sales mix, with our rubber boot brands delivering stronger growth relative to the rest of the brands in our portfolio. Retail gross margin for the nine months ended September 30, 2025 was $44.0 million, or 45.9% of net sales, compared to $38.7 million, or 46.5% of net sales, for the nine months ended September 30, 2024. The decrease in gross margin as a percentage of net sales was attributable to a decrease in margin on our third-party marketplace platforms, driven by increased promotional activity and more competitive pricing as we continued to optimize our inventory position during the first half of 2025 prior to our price increase going into effect in the third quarter of 2025. Contract Manufacturing gross margin for the nine months ended September 30, 2025 was $0.8 million, or 8.2% of net sales, compared to $1.1 million, or 11.0% of net sales, for the nine months ended September 30, 2024 . The decrease in gross margin was driven by reduced economies of scale at our Puerto Rico manufacturing facility. Nine Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) OPERATING EXPENSES: General and administrative $ 84,667 $ 78,266 $ 6,401 8.2 % Sales and marketing 22,396 20,021 2,375 11.9 Depreciation and amortization 4,905 4,984 (79 ) (1.6 ) Total Operating Expenses $ 111,968 $ 103,271 $ 8,697 8.4 % % of Net Sales 32.7 % 31.7 % 1.0 % Operating expenses for the nine months ended September 30, 2025 were $112.0 million, or 32.7% of net sales, compared to $103.3 million, or 31.7% of net sales, for the nine months ended September 30, 2024. The increase in operating expenses as a percentage of net sales was due to increases in selling and outbound logistics costs associated with a higher volume of Retail sales in the current year period as well as an increase in marketing investments. Nine Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) INTEREST EXPENSE AND OTHER: Interest expense $ 7,459 $ 13,969 $ (6,510 ) (46.6 )% Other income, net (92 ) (5 ) (87 ) (1740.0 )% Total Interest Expense and Other $ 7,367 $ 13,964 $ (6,597 ) (47.2 )% Interest Expense and Other - net for the nine months ended September 30, 2025 was $7.4 million compared to $14.0 million in the year ago period. The decrease in interest expense was partially due to a $2.6 million loan extinguishment charge during the first six months of 2024 associated with a prepayment penalty and accelerated amortization of deferred financing fees in connection with paying off our previous term debt. The remaining decrease in interest expense was due to lower interest rates resulting from our debt refinance that occurred April 2024 as well as lower debt levels. Nine Months Ended September 30, ($ in thousands) 2025 2024 Inc./ (Dec.) Inc./ (Dec.) INCOME TAXES: Income Tax Expense $ 4,468 $ 2,011 $ 2,457 122.2 % Effective Tax Rate 22.1 % 23.4 % (1.3 )% The decrease in our effective tax rate in the first nine months of 2025 to 22.1% from 23.4% in the year ago period was primarily due to the mix of earnings between the United States and our international subsidiaries. 18 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Overview Our principal sources of liquidity are our income from operations, as well as access to the borrowing capacity under our ABL Facility. We believe that we have sufficient liquidity to support our ongoing operations and to re-invest in our business to drive future growth. As of September 30, 2025, we maintained cash and cash equivalen ts of $3.3 million and had $40.1 m illion of availability under our ABL Facility. Our primary ongoing operating cash flow requirements are for inventory purchases and other working capital needs, capital expenditures and payments on our credit facilities. Our working capital consists primarily of trade receivables and inventory, offset by short-term debt and accounts payable. Our working capital fluctuates throughout the year as a result of our seasonal business cycle and is generally lowest in the months of January through March of each year and highest during the months of May through October of each year. Our cash generated from operations throughout the year is typically sufficient to fund our seasonal working capital requirements; however, we have the ability to borrow on our ABL Facility as needed and, as such, its balance may fluctuate significantly throughout any given year. In addition to our ABL Facility with outstanding borrowings of $112.1 million as of September 30, 2025, we also have a Term Facility with outstanding borrowings of $28.9 million as of September 30, 2025. Our ABL Facility and Term Facility require us to maintain a minimum fixed charge coverage ratio, as defined in the ABL Agreement. Additionally, the ABL Facility and Term Facility contain restrictions on the amount of dividend payments and the amount of share repurchases of common stock. As of September 30, 2025, we were in compliance with such covenants and restrictions under the ABL Facility and Term Facility. We may utilize portions of our excess cash to prepay certain amounts of long-term debt prior to maturity. Our capital expenditures primarily relate to investments in information technology, molds and equipment associated with our manufacturing and distribution operations, merchandising fixtures and projects related to our corporate offices. We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options. As of September 30, 2025, our material cash requirements from known contractual obligations and commitments relate primarily to our long-term debt and operating leases commitments. See Note 8 - Long-Term Debt to the Unaudited Condensed Consolidated Financial Statement for more information. Based on our current expectations and forecasts of future earnings, we believe our cash generated from operations will provide sufficient liquidity to fund our operations and debt and lease obligations for the next twelve months and beyond. Cash Flows Nine Months Ended September 30, ($ in millions) 2025 2024 Operating activities $ (1.3 ) $ 28.4 Investing activities (5.7 ) (1.5 ) Financing activities 6.6 (27.7 ) Net change in cash and cash equivalents $ (0.4 ) $ (0.8 ) Operating Activities. Net cash used in operating activities for the nine months ended September 30, 2025 was $1.3 million and cash provided by operating activities for the nine months ended September 30, 2024 was $28.4 million. Adjusting for noncash items, net income provided a cash in-flow of $27.4 million and $20.0 million for the nine months ended September 30, 2025 and 2024 , respectively. The net change in working capital and other assets and liabilities resulted in cash used by operating activities of $28.7 million for the nine months ended September 30, 2025 , compared to an increase in cash provided by operating activities of $8.3 million for the nine months ended September 30, 2024 . 19 Table of Contents An increase in inventory resulted in a use of cash of $26.9 million and $2.6 million for the nine months ended September 30, 2025 and 2024, respectively. The increase in cash used to purchase inventory was a result of the additional tariffs imposed during 2025 as well as increased purchases in order to meet estimated demand for the fourth quarter of 2025. An increase in accounts receivable resulted in a use of cash of $10.2 million and $1.2 million for the nine months ended September 30, 2025 and 2024, respectively. The change in cash used in accounts receivable was due to an increase in sales in the third quarter of 2025 over the prior year end when compared to the third quarter of 2024. Investing Activities. Net cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $5.7 million and $1.5 million, respectively. We invested $5.7 million and $3.2 million in capital expenditures for our manufacturing operations and information technology during the nine months ended September 30, 2025 and 2024, respectively. The use of cash for the nine months ended September 30, 2024 was offset by proceeds from the sale of the Servus brand, totaling $1.7 million. Financing Activities. Net cash provided by financing activities for the nine months ended September 30, 2025 was $6.6 million compared to $27.7 million in net cash used in financing activities for the nine months ended September 30, 2024. The current year net source of cash primarily related to proceeds from our revolving credit facility offset by payments on our term loan and dividend payments. The net use of cash for the nine months ended September 30, 2024 primarily related to payments on our revolving credit facility and term loan offset by proceeds from our revolving credit facility and term loan. On February 25, 2025, we announced a share repurchase program of up to $7,500,000 of the Company's outstanding common stock, no par value per share. We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal course of business. See Note 13 - Commitments and Contingencies of our Unaudited Condensed Consolidated Financial Statements for further discussion of legal matters. We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities, also known as "Variable Interest Entities." Additionally, we do not have any related party transactions that materially affect the results of operations, cash flow or financial condition. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of the Company’s Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company’s estimates. However, actual results may differ materially from these estimates under different assumptions or conditions. We have identified the critical accounting policies used in determining estimates and assumptions in the amounts reported in our Management Discussion and Analysis of Financial Conditions and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024 . SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995 This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief, and expectations, such as statements concerning our future profitability and our operating and growth strategy. Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “likely,” “would,” “could” and similar expressions are intended to identify forward-looking statements. Investors are cautioned that forward-looking statements involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand, seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, increases or changes in duties and tariffs in countries of import and export, changing retail trends, the loss or disruption of our manufacturing and distribution operations, cybersecurity breaches or disruption of our digital systems, fluctuations in foreign currency exchange rates, economic changes, as well as other factors set forth under the caption “Item 1A, Risk Factors” in our Annual Report on Form 10- K for the year ended December 31, 2024 (filed March 17, 2025) and our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2025 (filed May 8, 2025) and June 30, 2025 (filed August 7, 2025), and other factors detailed from time to time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We assume no obligation to update any forward-looking statements. 20 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There have been no material changes to our market risk as disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10- K for the year ended December 31, 2024 .