Timberland laid out a five-year development plan yesterday that calls for a compound annual growth rate (CAGR) of 13 percent for the brand, acquired by VF Corp. three years ago, with increases of 12 percent for footwear and 14 percent for apparel. At this rate, Timberland's annual revenues would go up by $1.4 billion to reach a level of $3.1 billion by the end of 2019, comprising $2.5 billion in revenues from footwear and $680 million from apparel.
The total 2019 turnover would include $900 million in sales to be derived from corporate Timberland stores and $245 million from e-commerce. To help achieve the general targets, the marketing budget will be raised from about 6.0 percent of sales currently to a ratio of 6.5 percent.
Different rates of growth are expected in all the major regions of the world. For Europe, the Middle East and Africa (EMEA), Timberland is looking at an average annual increase of 10 percent, which would raise the annual revenues from the region by $380 million to $1 billion. The management wants to capitalize on its big businesses in Italy and the U.K.to expand further into Germany, Austria and Switzerland. Thus, the plan is to raise sales in the U.K. by 10 percent a year, in Italy by 13 percent a year and in the German-speaking countries by 31 percent a year.
Within the EMEA region, the business plan calls for annual increases of 8 percent for wholesale revenues, 12 percent in retail revenues and 26 percent in e-commerce. That means an additional turnover of $230 million, $120 million and $30 million in these three channels by the end of the five-year period. About half of the media spending in EMEA would be digital.
A higher CAGR of 14 percent is eyed in North America, where the brand has more room to expand in the apparel sector than in Europe. Timberland has re-entered the market for apparel with a premium positioning, notably at Nordstrom, and there are no plans to re-enter the mid-tier segment. By 2019, the brand expects to generate annual sales of $1.5 billion in North America, or $700 million more than now, with the U.S. accounting for 75 percent of the expansion.
Timberland's revenues are seen doubling to $620 million in the Asia-Pacific region five years down the road, rising by 15 percent annually. Most of the $310 million of projected growth from the present levels is expected to come from China and South Korea, which are largely untapped markets for the brand. These two markets would contribute 51 and 13 percent of the planned increase, and Japan 6 percent.
An additional $170 million in regional turnover would come from own stores, $100 million from the wholesale channel and $40 million from e-commerce. That would imply annual growth rates of 14 percent, 13 percent and 36 percent for these three channels, respectively.