Timberland increased revenues by 26.7 percent to $491.1 million in the fourth quarter of 2010, thanks mainly to strong growth in men's products and to the company's ecological Earthkeepers range, which enjoyed triple-digit growth in the quarter and the full year. In 2010, four of the top 20 products sold in Timberland's stores were Earthkeepers. The group's president, Jeffrey Swartz, said that it will focus on Earthkeepers to further reach female consumers in 2011.
The company's net income rose to $42.1 million from $22.3 million in the final quarter. In the full year, it went up by 70.6 percent to $96.6 million compared with 2009. Total revenues increased by 11.2 percent for the year to $1,429 million, with footwear rising at the same rate to $1,036 million.
The company booked a 19 percent increase in its order backlog at the end of the year, with double-digit rises in all geographic regions. Financial analysts forecast that the company could end 2011 with full-year sales of nearly €1.60 billion, up by about 12 percent from €1.43 billion in 2010. Timberland's inventories at the end of the year stood at $180.1 million, up by 13.6 percent from a year earlier.
In North America, the group's revenues increased by 16.8 percent to $252.0 million in the fourth quarter, underpinned by higher wholesale turnover, especially in men's footwear, and growth in SmartWool apparel and accessories. European revenues increased by 32.3 percent to $169.6 million, driven by Germany, Scandinavia and the Benelux region as well as a strong performance in men's, women's and kids' footwear. On a constant currency basis, European sales were up by 40.1 percent.
Asian revenues increased by 58.5 percent to $69.6 million in the fourth quarter, supported especially by strong growth in Japan, Taiwan, and China, and in men's, women's and kids' products. At constant currency rates, sales rose by 48.3 percent in the region. Swartz stressed that Asia “is critically important to Timberland's long-term growth.” In China, sales more than doubled throughout the year, but Japan remains Timberland's main market in Asia and has showed a return to sustained growth at the wholesale and retail levels, after a period of difficulties.
Global footwear turnover was up by 31.2 percent to $358.8 million in the quarter, with higher sales of men's products as well as strong growth in women's and kids' footwear in all regions. Revenues from apparel and accessories increased by 16.6 percent to $125.1 million, led by Timberland apparel sales in Asia.
By channel, wholesale revenues went up by 30.9 percent to $326.6 million, with double-digit growth across all segments. Retail sales increased by 19.0 percent to $164.5 million supported by higher comparable store sales in each region and the net addition of 10 stores. Revenues from royalties and other sources rose by 4.1 percent in the quarter to $7.3 million.
In the U.S., comparable store sales increased by 6.2 percent in the last quarter. Globally, comparable store sales were stronger, rising by 17.6 percent. This was notably the case in Asia, where Timberland sells predominantly directly to consumers and where it has its most profitable stores. For the full year, same-store sales were up by 3.1 percent in the U.S. and rose by 8.8 percent globally.
Operating income surged to $61.7 million from $37.2 million a year earlier in the last quarter of 2010. The gross margin rate declined to 48.6 percent from 49.4 percent due to higher costs and freight expenses. Timberland partially offset the cost increase with an improved product mix and fewer close-outs. In 2011, manufacturing and transportation costs are expected to continue rising and to negatively impact operating profits. The group will seek to mitigate the situation by aggressively reducing operating costs.
Financial analysts see the gross margin further declining in 2011 and averaging around 47.5 percent of sales in 2011, compared with 48.7 percent in 2010, but Timberland's management remains committed to its pledge of seeking to boost the operating margin to 50 percent of sales.
The company bought 402,000 of its shares in the fourth quarter at a cost of about $10 million. At the end of 2010, it had $272.2 million in cash and no debt.