The Timberland Company pointed to double-digit constant dollar gains in Europe and Asia, coupled with balanced growth in its Domestic business and stronger global Footwear sales, as the primary drivers for a 7.2% constant dollar increase in fourth quarter revenues. FX rate benefits added another 2.2%, or $9.2 million, to the revenue increase, pushing total fourth quarter revenue up 9.4% to $454.7 million.
Net income growth outpaced revenue gains, increasing 14.1% to $45.0 million, or $1.29 per diluted share, from net income of $39.5 million, or $1.10 per diluted share, in the year-ago quarter. Gross margins were down 20 basis points to 47.1% of sales, due primarily to a 120 basis point hit from higher markdowns and sales allowances in the U.S. business.
U.S. revenues were up 5.2% to $306.4 million, with the Wholesale business increasing 5.2% to $215.2 million and the Direct business growing 5.3% to $91.3 million. Retail comps were up 4% for the period.
TBL said strength in the U.S. mens Apparel business was offset by declines in PRO Apparel revenues, due primarily to a decision by Sears to exit the work apparel category. Gains on the U.S. Footwear side were attributed to strength in boots, PRO, outdoor performance, and kids. Timberland did say that the weather impacted sell-through of the winter Footwear product until late in the quarter.
International revenues were up 19.3%, or up 11.9% in constant dollars, to $148.2 million in the period. Wholesale revenues drove the increase, jumping 28.7% to $94.2 million, while the Direct business posted a 6.0% increase to $54.1 million for the quarter. TBL also said they saw continued progress in building key expansion markets such as Canada.
Revenues in Europe grew 19%, or 10% in constant dollars, to $103 million in the fourth quarter. The gains were driven by Footwear, which was said to be “quite strong”, supported by double-digit gains in both boots and kids, while Apparel saw improving at-once sales. TBL cited “continued strong growth” in the U.K., Benelux, and Scandinavia. The company added 11 new franchise doors across Europe, bringing the total retail door count to 230 doors at year-end.
Asia revenues were up 20%, or up 17% in constant dollars, to $40 million in the fourth quarter. TBL said the Asia results, which reflected growth in both Apparel and Footwear, were driven by gains in Japan and continued strong growth in Taiwan, Hong Kong, and Malaysia.
Total Wholesale revenues were up 11.4% for the quarter to $309.3 million, while total Direct revenues rose 5.5% to $145.3 million. Fewer retail selling days in Q4 were said to have impacted retail sales growth by approximately 3% for the period and overall sales growth by roughly 1% in Q4.
Fourth quarter global Footwear revenues increased 10.0% to $352.3 million, driven by growth in boots, kids, and Timberland PRO Series categories. Global Apparel and Accessories revenue grew 7.5% to $97.9 million, reflecting gains in International markets.
For the full year, Timberland posted an 8.2% increase in revenues on a constant dollar basis.
Management said that new product in the company’s seasonal lines accounted for 60% of the product offering in 2004. TBL President and CEO Jeff Swartz also said that roughly 50% of product was on “scarcity allocation”, a percentage he did not see increasing.
Backlog at year-end was up 16% versus year-end 2003, or up roughly 11% in constant dollar terms. Management said they had “strong growth” in the International business and “solid increases” in the U.S. business. The International order book was said to be up in double-digits at year-end, while the U.S. order book increased in single-digits.
For 2005, Timberland forecasts double-digit gains in earnings per share on low- to mid- single-digit revenue growth. First quarter revenue growth is seen in mid-singles. The U.S. business is expected to be “relatively flat” in 2005, with strength in PRO, OP, and Apparel offset by pressure on the boot business.
>>> The International gains better stick because “flat” means down when the competition grows…
