Executives of VF Corp. have admitted that Timberland failed to live up to expectations in the last few years, growing at a very slow place, largely due to a slowdown in sales of iconic styles like the Yellow Boot and the rising popularity of athletic-inspired sneakers. VF had projected a compound annual growth rate (CAGR) of 4 to 6 percent for the brand during the 2016/21 period, with a target of $1.9 billion for the past financial year, but it has come up short of its goals.
Timberland generated a global turnover of around $1.8 billion in the financial year ended on March 31. As we see it, this was not much higher than the brand's revenues of $1.4 billion in 2005, when VF acquired the brand and its Smartwool sub-brand for about $2 billion, equivalent to 11.1 times Ebitda. Its profitability has probably improved, however, thanks to synergies with the rest of the group.
Martino Scabbia Guerrini, executive vice president and group president of VF Corp. for the EMEA region, reportedly indicated in a presentation to some fashion journalists a few days ago that the brand is branching out of its focus on outdoor lifestyle with specific approaches to younger and more casual and contemporary consumer segments.
A step in this direction was the appointment nine months ago of Christopher Raeburn, a British fashion designer committed to sustainability, as Timberland's first creative director. Another aspect of the brand's “reset” will be its ongoing expansion in the areas of apparel and women's footwear, whose sales have been growing over-proportionately in the last few years.
VF's new business plan calls for Timberland to post CAGR of 3 to 4 percent globally between this year and 2024, rising by 2 to 3 percent in EMEA, by 3 to 4 percent in the U.S. and by 7 to 8 percent in Asia-Pacific. The share of Greater China in the Asia-Pacific region is due to grow to 77 percent in 2024 from 65 percent in 2019.
So Timberland's overall sales in the EMEA region are projected to shrink from 39 to 37 percent of the brand's global turnover, after rising at an annual rate of 2 to 3 percent. The U.S. should keep its present share of 39 percent, while sales in the rest of the Americas will likely drop to 6 percent.
The management noted that the brand has been registering a sequential improvement in its quarterly sales lately. In the fourth quarter of the last financial year, its sales went up by 6 percent, with high single-digit growth in the non-classic footwear category and 5 percent growth in EMEA.
In terms of sales channels, e-commerce is expected to jump from 8 percent to 14 percent of the brand's turnover by 2024, rising at an annual clip of 15 to 16 percent. Brick-and-mortar stores should represent 24 percent of sales by 2024, down from 26 percent at present, while integrating more online sales functions. Revenues from wholesale customers are due to expand at an annual rate of 2 to 3 percent, but their share is set to decline from 66 to 62 percent of the total turnover.
Significant shifts are expected in various product categories. By 2024, women's shoes should come to represent 18 percent of sales, compared with 16 percent now, while apparel and accessories should grow from 28 to 29 percent of the turnover. The share of men's shoes is expected to decline from 56 to 53 percent of sales, but it should still continue to grow at an annual average rate of 2 to 3 percent, driven by more “targeted” and “compelling” designs.
The growth of apparel will be aided in part by Timberland's eco-friendly Earthkeepers program. The brand continues to promote its commitment to the environment through its ongoing tree-planting program, supported now by a new global campaign, “Nature needs Heroes,” that stimulates the organization of numerous initiatives at the local level.