The company, which celebrated its 30th birthday last year, is 4 times younger than Wolverine World Wide but bigger and more profitable. Its global sales rose by 12.7 percent last year to $1,342.1 million, or by 8.0 percent in constant dollars and the momentum is still on, allowing the management to predict double-digit increases in sales and profits for this year. Sales grew by 16.4 percent in the 4th quarter and the year-end order backlog was 16 percent higher than at the end of 2002, although in local currencies it was up by only 7 percent.
Timberland’s operating profit grew by 32.8 percent to a record of $184.3 million in 2003, including about $3 million stemming from foreign currency gains, and the net profit rose by $117,879,000 from $95,113,000 in 2002. Cash flow reached a peak of nearly $200 million. The gross margin increased to 47.3 percent in the 4th quarter. Profitability was boosted by the weakening dollar and Timberland will reinvest some of the extra profits in Europe during the 2nd quarter on new marketing programs in support of new products and new initiatives.
Footwear led by far the company’s growth in 2003, with strength in boots, casual footwear and children’s shoes. Global footwear revenues increased by 20.7 percent to $320.3 million in the 4th quarter. Instead, revenues from apparel and accessories rose by only 2.9 percent to $91.0 million as sales declines in Europe were offset by gains in Asia. Timberland is doing well with shirts and other basic apparel items in Europe, but it’s having competition problems in other product sectors.
The company continues to invest on its new design center in London to come up with innovative garments for the European market. It’s also reportedly developing a new line of leathergoods in Italy. Separately, it has signed a licensing deal with Bacou-Dalloz, the large French-based supplier of industrial safety products, for a new European line of work boots, reminiscent of the origins of the brand.
Timberland has shortened lead times for the development of new products. Six development teams have been set up to target 6 different consumer groups. Working across the different product categories, the company’s so-called “invention factory” is coming up with many new ideas, including a line of travel footwear with interchangeable components that will be offered in Timberland’s retail stores next Fall.
In the 4th quarter, Timberland’s sales across all the product categories rose by 11.1 percent in the USA. They jumped by 30.7 percent in the rest of the world, or by 17.1 percent in local currencies, with 2 percentage points of the rise attributable to the company’s new subsidiary in Canada. Timberland’s own stores in the USA enjoyed a 5.9 percent increase on a same-store basis. For the full year, sales outside the USA were up by 27 percent, or 14 percent in constant dollars.
Sales continued to grow at double-digit rates both in Europe and Asia during the latest quarter. Strong gains were recorded in established markets like the UK and Italy and double-digit increases in other markets such as Germany, Spain and France. Japan is now the third-largest foreign market for the brand after the UK and Italy, where total sales are reported to have grown by 17 percent in 2003, thanks in part to a strong store franchising program. The number of Timberland stores in Italy has gone up from 35 to 108 doors in the past 3 years and another 10 are in the pipeline for 2004, including one on the island of Capri.