Timberland Feeds Off Int’l Gains in Q3…

October 25, 2004
SGB Executive
by

Timberland saw a larger portion of its sales come from the International segment market in the third quarter, thanks in large part to FX rates shifts in currency. The Consumer Direct business — while lagging the growth rate of the Wholesale business – was cited as a primary reason that the Apparel business stayed in positive territory in the quarter after Pro Apparel sales were affected by Sears’ cut back in the work apparel business.

Total Wholesale sales climbed 11.7% for the period to $407.5 million. The U.S made up 57.5% of the Wholesale business in Q3 2004 versus 60.5% in the year-ago quarter, thanks is large part to the FX rate shift. The total Consumer Direct business was up 9.2% for the quarter to $86.4 million, with the U.S. representing 58.4% of the business versus 60.2% in Q3 2003.

The total U.S. business grew 6.0% to $284.7 million, while International revenues jumped 19.3% to $209.2 million. The FX rate benefit contributed about 3.4% of total company revenue gains for the period and added 8.7% in benefit to the International business. Sans the FX rate benefit, total sales would have grown 7.9% to $478.6 million and the International business would have grown 10.6% to $190.7 million.

The growth in U.S. wholesale footwear revenues were attributed to stronger shipments in Casual, Kid’s, and Pro product, while progress in “developing suburban points of distribution” was cited as a key driver going forward. The company said footwear sell-through was “somewhat mixed” during the spring and summer.

After a great deal of questioning by analysts on a call Thursday, Timberland president and CEO Jeffrey Swartz finally admitted that they probably did not bring their Merge product, the much-touted boot/sneaker combo, to market at “the ideal time”. He said it “sat at retail” and had “okay” results, but not the kind of powerful results they would have liked in the early going. He said they (Timberland) need to be “better informed about the warm weather cycle and how to address it.”

Timberland brand apparel continued to grow at double-digit rates in the Wholesale business, due to gains at department stores and independent retailers. Pro apparel revenues declined due to the changes at Sears.

U.S. Consumer Direct sales grew through a combination of comp store gains and new stores, most notably the addition of five new outlet stores in the last year. TBL sees adding five net new stores in the next year as well. TBL currently has a total of 78 doors in the U.S., with outlet stores accounting for 56 stores of the total mix. They now have four fewer specialty stores.

In the International segment, Asia revenues grew 15%, or 10% in constant dollars, driven by “strong gains in Casual Footwear and Apparel.” TBL said the gains here reflect “solid growth” in Japan, a new retail store in Singapore, and other store refurbishments.

Europe revenues increased 19%, or 9% in constant dollars, due to “strong Footwear gains” and FX rate gains offsetting constant dollar declines in Apparel. TBL saw double-digit growth in Boots, Men’s Casual, Women’s Casual, and Kid’s in the Footwear category. The company cited “strong gains” in developed markets like the U.K. and double-digit increases in “key expansion markets such as Germany and Scandinavia.”

Timberland said the continued growth in International sales and the FX rate bennies also helped push improvement in the gross margin for the period, a benefit the expect to see moderate for the fourth quarter. TBL said the benefits contributed 170 basis points of the GM improvement for Q3, but see that adding just 25 bps to 50 bps in Q4.

The company is also forecasting “somewhat moderated sales growth” in Q4, guiding to increases in the mid-single-digit neighborhood.

Timberland Feeds Off Int’l Gains in Q3…

SGB Update

Timberland saw a larger portion of its sales come from the International segment market in the third quarter, thanks in large part to FX rates shifts in currency. The Consumer Direct business — while lagging the growth rate of the Wholesale business – was cited as a primary reason that the Apparel business stayed in positive territory in the quarter after Pro Apparel sales were affected by Sears’ cut back in the work apparel business.

Total Wholesale sales climbed 11.7% for the period to $407.5 million. The U.S made up 57.5% of the Wholesale business in Q3 2004 versus 60.5% in the year-ago quarter, thanks is large part to the FX rate shift. The total Consumer Direct business was up 9.2% for the quarter to $86.4 million, with the U.S. representing 58.4% of the business versus 60.2% in Q3 2003.

The total U.S. business grew 6.0% to $284.7 million, while International revenues jumped 19.3% to $209.2 million. The FX rate benefit contributed about 3.4% of total company revenue gains for the period and added 8.7% in benefit to the International business. Sans the FX rate benefit, total sales would have grown 7.9% to $478.6 million and the International business would have grown 10.6% to $190.7 million.

The growth in U.S. wholesale footwear revenues were attributed to stronger shipments in Casual, Kid’s, and Pro product, while progress in “developing suburban points of distribution” was cited as a key driver going forward. The company said footwear sell-through was “somewhat mixed” during the spring and summer.

After a great deal of questioning by analysts on a call Thursday, Timberland president and CEO Jeffrey Swartz finally admitted that they probably did not bring their Merge product, the much-touted boot/sneaker combo, to market at “the ideal time”. He said it “sat at retail” and had “okay” results, but not the kind of powerful results they would have liked in the early going. He said they (Timberland) need to be “better informed about the warm weather cycle and how to address it.”

Timberland brand apparel continued to grow at double-digit rates in the Wholesale business, due to gains at department stores and independent retailers. Pro apparel revenues declined due to the changes at Sears.

U.S. Consumer Direct sales grew through a combination of comp store gains and new stores, most notably the addition of five new outlet stores in the last year. TBL sees adding five net new stores in the next year as well. TBL currently has a total of 78 doors in the U.S., with outlet stores accounting for 56 stores of the total mix. They now have four fewer specialty stores.

In the International segment, Asia revenues grew 15%, or 10% in constant dollars, driven by “strong gains in Casual Footwear and Apparel.” TBL said the gains here reflect “solid growth” in Japan, a new retail store in Singapore, and other store refurbishments.

Europe revenues increased 19%, or 9% in constant dollars, due to “strong Footwear gains” and FX rate gains offsetting constant dollar declines in Apparel. TBL saw double-digit growth in Boots, Men’s Casual, Women’s Casual, and Kid’s in the Footwear category. The company cited “strong gains” in developed markets like the U.K. and double-digit increases in “key expansion markets such as Germany and Scandinavia.”

Timberland said the continued growth in International sales and the FX rate bennies also helped push improvement in the gross margin for the period, a benefit the expect to see moderate for the fourth quarter. TBL said the benefits contributed 170 basis points of the GM improvement for Q3, but see that adding just 25 bps to 50 bps in Q4.

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