Timberland’s net profit jumped by 35 percent to $7,868,000 in the 2nd quarter ended July 2, leaving the company with $163.6 million in cash and no debt outstanding. The gross margin rose by 3 full percentage points to 49.7 percent in the quarter, and the operating margin improved by 0.9 percentage points to 5.2 percent, thanks to foreign exchange gains and to lower product-related costs, partly offset by increased investments in advertising – “Make it Better” is the brand’s new global tagline - and in product development.
Total revenues increased by 8.7 percent to $230.2 million in the quarter, with 2.6 percentage points of the growth derived from foreign currency gains. US sales rose by 7.6 percent, with balanced growth in footwear and apparel, supporting an 8.4 percent increase in wholesale revenues. Retail sales in the USA increased by 5.2 percent, but with a 1.3 percent decline on a same-store basis.
In the rest of the world, sales were up 10.5 percent in dollars. In local currencies, foreign sales rose by only 3.7 percent, thanks to double-digit gains in Asia, while European sales were flat. European footwear sales have been strong through the first half of the year, rising at a double-digit rate in dollar terms, and they should continue to remain strong. European apparel sales finally picked up a bit in the 2nd quarter, thanks to increased sales of off-price goods, but they should decline again in the second half.
Globally, Timberland’s apparel sales increased by 17 percent to $54.7 million, rising strongly in the USA and Asia. Global footwear sales rose by 7 percent to $173.4 million. Overall, the management is projecting mid- to high single-digit revenue growth for the full year, with earnings again posting a double-digit increase in the 2nd half.
As an aside, Timberland is launching a new concept of customizable boots in its US stores and in selected European and Asian markets next month. Called “Boot Studio,” it will offer consumers 500,000 different combinations.
Meanwhile,Timberland has promoted Jaume Miquel as managing director for Southern Europe, supervising sales and marketing activities in France, Spain, Portugal and Italy. The 40-year-old Spanish executive worked for BBDO and Levi Strauss before joining Timberland’s Spanish subsidiary in 1998 as sales and marketing director. He became country manager in 2002 and saw his responsibilities extended to France as well last year.