Timberland Posts Mixed Q1

Timberland Posts Mixed Q1
Jeff Swartz

NEW YORK — Continued softness in the U.S. men’s boot and casual business and the overall economic environment contributed to another tough quarter at Timberland Co., but some analysts said the worst could be over for the Stratham, N.H.-based company.

Last Thursday, Timberland reported a 12 percent decline in first-quarter profits to go with a 12.9 percent slide in revenues. For the three months ended April 3, net income was $15.9 million, or 27 cents a diluted share, versus $18 million, or 30 cents, in the year-ago quarter.

Total revenues were $296.6 million versus $340.4 million last year. By region, revenues fell 13 percent in North America to $119.9 million, were down 15 percent in Europe to $140 million and slipped 2.9 percent in Asia to $36.8 million.

Footwear revenues were down 10.5 percent to $211.6 million, while apparel and accessories dropped 19.7 percent to $78.7 million. The company touted “strong gains” in the men’s boot business in both Europe and Asia, but said they were offset by declines in the casual and men’s North American boot businesses.

On a conference call last week, Jeffrey Swartz, president and CEO, said that over the last 18 months, Timberland has worked to leverage the brand’s heritage — and that, coupled with the firm’s financial positioning, could be a benefit.

“This foundation allows us to continue to stay committed to our brand-invigorating strategies and positions us well for growth when the economy recovers,” he said.

Swartz also hailed the company’s sustainability minded Earthkeepers line as a major brand initiative.

“Earthkeeper remains our single biggest big idea, the best of our thinking across products, marketing, commerce and culture,” he said. “When we launched the line in fall ’07, we achieved about $3 million in sales in the first season. In 2009, the Earthkeepers franchise is on track to achieve around $65 million in sales globally across men’s, women’s and kids’.”

The company ended the quarter with $159.2 million in cash and no debt. Inventory at the end of the quarter was $162.8 million, down 9.7 percent from a year ago, reflecting the firm’s focus on inventory management.

Mitch Kummetz, an analyst with Robert L. Baird, wrote in a note that the company’s efforts to hold down costs were paying off. “The first quarter was not a good quarter, but it was better than expected, especially with regard to expenses. For the balance of the year, we expect sales declines to be moderate, and we believe the worst is now behind Timberland.”

But Christopher Svezia, an analyst with Susquehanna Financial, cautioned that the challenging retail climate and the brand’s urban-fashion positioning would continue to be obstacles.

Successes overseas and with the Earthkeepers product are encouraging, he said, but reestablishing the brand’s position in the U.S. will be a key challenge. “At the end of the day, this company lives and dies by the Timberland brand,” Svezia said.

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