The strong boot trend that has been prevailing in Europe in the last months has strongly benefited Timberland, which saw its sales rise by 17.1 percent to $128.4 million in Europe for the last quarter. This is equivalent to an increase of 8.3 percent in constant currencies.
This European surge was also boosted by growing sales of women's footwear in all categories, and the opening of nine retail stores since the fourth quarter of 2008. This strongly contributed to an increase of 23 percent in European retail sales, but comparable store sales also jumped by 10 percent in the region. Retail sales enjoyed the strongest comparable sales rise in the Middle East, the UK and Spain.
Growth in Europe only partly made up for declining sales in other regions, so that Timberland ended the quarter with a 3.9 percent decline in sales in constant currencies. The drop was blamed on the downturn of the boots business in other regions, which had a stronger impact than increased sales of SmartWool apparel and performance footwear. In reported terms, Timberland's quarterly turnover remained almost flat at about $387.8 million.
Jeffrey B. Swartz, the company's chief executive, said that Timberland had made remarkable progress in a tough year, by applying its strategy of focusing on fewer concepts and executing them more thoroughly. While the performance of the boots business was mixed, Swartz highlighted the growth of the Earthkeepers range, which saw its revenues more than double for the year, and the launch of trail running footwear in Timberland's outdoor performance range. The integrated relaunch of women's product in Italy was another example, as it yielded an increase of 24 percent in comparable retail sales in the country last year.
North American sales dropped by 6.5 percent to $215.7 million for the quarter. Again, managers pointed to the weakness of the boots category, while SmartWool and men's performance footwear saw their sales increase. Timberland's retail sales in North America declined by 3 percent for the quarter, with a 5 percent drop in comparable store sales.
Yet Asian sales were worst hit, with a sales dive of 13.4 percent to $43.6 million for the quarter, which would even have fallen by 17.6 percent in constant currencies. Declining sales in Japan and Hong Kong offset growing turnover in China and Taiwan. Retail sales were down by 10 percent, with comparable store sales off by 6 percent and the closure of eight under-performing stores.
Global footwear sales were off by 2.8 percent to $273.4 million in the quarter, since the increase of boots sales in Europe could not make up entirely for declines in the same category in Asia and North America. On the other hand, sales of apparel and accessories rose by 2.9 percent to $106.8 million, owing to the strong performance of SmartWool in both categories.
Timberland's retail continued to increase, up by 3.7 percent to $138.2 million for the quarter, although comparable store sales were flat. Timberland's online sales jumped by 13 percent. The overall sales decline was entirely caused by lower wholesale revenues, down by 3.0 percent to $249.5 million, chiefly attributed to dropping sales of children's boots and Timberland-branded apparel.
Then again, the company's gross margin reached about 51 percent, up by nearly 600 basis points for the quarter. About half of this was due to lower input costs, particularly lower hide and transportation costs, while the rest came from changes in product and distribution mix. The increased share of European sales was favorable in this context. The company's managers displayed cautious optimism about the present year, as retailers appeared to be in better shape. However, the company noted that transport costs could increase again in the second half.
The better gross margins contributed to a rise in Timberland's operating income to $37.2 million for the quarter, compared with $23.1 million for the same quarter last year. The company ended the quarter with net income of $22.3 million, up from $13.1 million the year before.
For the full year, Timberland's sales were down by 5.8 percent to $1,286 million, with decreases in all regions. Europe still fared better than others, with a sales dip of 4 percent to $529.3 million, compared with a drop of 6.5 percent in North America and 8.0 percent in Asia. The company ended the year with net income of $56.6 million, up from $42.9 million the previous year. Timberland ended the year with nearly $290 million in cash and no debt.