Timberland Back Half Cloudy

After a tough first quarter, The Timberland Co. is working hard to become a more successful year-round business.

The firm said last Thursday it is counting on retail expansion to help seasonalize the business so it is not as dependent on the back half of the year.

“Given great products like Earthkeeper boots, shoes and sandals, it’s time for us to market more aggressively in the first half of the year,” said Timberland President and CEO Jeffrey Swartz.

But analysts cautioned any extra investments could hamper margins.  

“It’s likely to make achieving operating margin expansion difficult,” said Citigroup analyst Kate McShane.

Meanwhile, the firm is banking on a stronger second half. Swartz said he expected “second-half marketing to drive top-line growth and it will help us take strategic price increases as a way to mitigate gross margin pressure.”

Mitch Kummetz, analyst at R.W. Baird, said he “expects stronger wholesale growth in the back half of the year than in the first half. Although we suspect Timberland is sitting on strong fall ’11 pre-book orders, we worry a little about the outlook for its direct-to-consumer business.”

Timberland’s first-quarter net income fell to $18 million, or 35 cents a share, missing expectations for earnings per share of 59 cents as polled by Yahoo Finance.

The news caused Timberland’s stock to decline 30 percent in trading last Thursday, the day the results were released.

Revenue increased 10 percent to $349 million, from $317 million, on the back of healthy growth of the Earthkeepers and Outdoor Adventure lines across North America, Europe and Asia. Global footwear sales increased 10 percent to $248.2 million, led by double-digit improvements in men’s and women’s shoes in North America, and men’s and kids’ footwear in Europe.

But costs rose as a percentage of revenue, due to selling, general and administrative expenses.

Gross margin declined 300 basis points to 46.8 percent.

Timberland ended the quarter with $265.3 million in cash and no debt.

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