Timberland indicates that it expects its profits from 2nd quarter to drop below last year’s levels. It is forecasting flat to modest revenues and gross margin gains for the quarter but higher spending for global business development. It is still aiming for single-digit revenues growth and double-digit revenue growth for the year, while accounting for expected moderate declines in US sales for the 2nd and 3rd quarters.

Timberland’s net income rose by 35.7 percent to $42,247,000 for the 1st quarter ended April 1, exceeding analysts’ forecasts, as revenues rose by 10.1 percent to $354.2 million, with 2.7 percentage points of the growth stemming from foreign currency gains. All major sectors contributed to the growth. The operating margin rose by 260 basis points to 17.5 percent.

 

US revenues rose by 4.0 percent in the quarter, with gains of 4.9 percent in the wholesale business to $116.8 million and of 1.4 percent in its own retail stores, where sales grew by 3.9 percent on same-store basis. Outside the USA, sales rose by 15.3 percent in dollars and by 11.0 percent in local currencies, driven by strong constant dollar sales gains in Europe and Asia. There were increases in retail sales also in these markets on a same-store basis.

By product category, footwear revenues rose by 11.1 percent to $266.0 million. The growth was driven by boots, children’s, men’s casual and Timberland PRO footwear. Global revenues from apparel and accessories went up more moderately, growing by 6.7 percent to $84.6 million.

Timberland’s boot business started slowly last Fall, but picked up at the end of the winter due to prolonged cold weather. The slow start could have been a weather issue or due to the fashion shift to white shoes. It appears that the group is getting lower commitments from urban retailers for next year because of last season, and its boot business is the more profitable part of the line. It continues to struggle with the Spring season, when urban customers tend to buy instead basketball shoes.

The group perseveres with its efforts in the performance outdoor market, but admits it could be doing more here. Timberland has set up a distinct business segment for outdoor performance, with its own product management, sales and marketing functions. Gary Smith has been appointed as the segment’s vice president and general manager and Joy Steere as been promoted as vice president of global product management in this area. Keith Denny’s responsibilities have been shifted, making him vice president of global product management for the boot business. Rob Koenen has become VP of global product management for men’s and children’s suburban footwear. Denny joined the group in 2003 as a senior category director for kids, after spending over 14 years with Nike. Koenen worked for Benetton SportSystem and Rollerblade before joining Timberland in 2001.

Timberland ended the 1st quarter with $203.7 million in cash and no debt outstanding. The quarter’s results benefited from the company’s initial period of conversion to new sourcing arrangements with independent suppliers, leading to an earlier transfer of title for certain third party shipments.