Timberland has reported a second-quarter sales increase of 5.1 percent to $189.0 million. However, it had a net loss of $23.5 million, worse than its loss of $19.2 million last year. This year's figure includes a $13.2 million non-cash, pre-tax charge for the impairment of certain goodwill and intangible assets. Without this charge, the loss would have been $10.2 million.
The quarterly operating loss was $33.3 million against an operating loss of $36.4 million in the prior year. A 7.5 percentage point improvement in gross margin to 49.5 percent was due primarily to favorable pricing and channel mix as well as lower input costs, but was partially masked by a non-cash impairment charge of $13.2 million primarily related the IPATH and howies brands.
Revenues grew by 1.4 percent in Europe to $66.8 million, or by 5.7 percent in constant currencies. Italy, Germany and Scandinavia saw double-digit growth, but the U.K. and France had decreases. Asian sales rose by 9.6 percent to $30.2 million, or by 4.8 percent on a currency-neutral basis. Taiwan and China showed significant growth, and comparable store sales were up by 11 percent, while the distributor business had a decline. In North America, turnover grew by 6.6 percent to $92.0 million on increases in apparel and accessories.
By sector, footwear climbed by 3.7 percent to $131.6 million on strong performances in European wholesale and North American sales of Timberland PRO footwear. European retail had a slight drop.
Turnover from apparel and accessories increased by 10.2 percent to $52.1 million as SmartWool accessories did well in North America, rising by 41 percent there; Timberland is trying to evolve this brand into more of an outdoor lifestyle brand with a greater global focus. In addition, the Timberland brand did well in Asian retail stores. These plusses counterbalanced weakness in Europe. Royalty and other revenue decreased by 3.8 percent to $5.3 million primarily due to a decline in licensed kids' apparel in North America.
During the quarter, there were more sell-throughs of higher margin products and fewer markdowns and returns; and sales of Earthkeepers more than doubled. That concept will get greater marketing dollars behind it this autumn with TV, digital media and in-store campaigns.
Global wholesale revenue was up by 8.3 percent to $117.5 million on double-digit growth in North America and Europe, partially offset by declines in Asia. Worldwide consumer direct revenue was flat compared with the prior year period, as improved comparable store sales in Asia and the net addition of eight new Asia retail stores in the last year were offset by declines in Europe and North America. Overall, comparable store sales were flat versus the second quarter of 2009; in the U.S. alone, they fell by 3.9 percent.
Timberland had 224 stores, shops and outlets worldwide at the end of the second quarter of 2010 compared with 220 at the end of the second quarter of last year.
In connection with its stock buyback program, the company repurchased approximately 1.3 million shares in the second quarter of 2010 at a cost of about $25.0 million.