Helped by growth overseas, The Timberland Co. reported first quarter 2010 net income climbed 61.6% on a 6.9% revenue gain. The North America region registered only a modest gain with flat footwear growth.  But Jeffrey Swartz, Timberland’s president and CEO, nonetheless said the brand’s turnaround in the region is “is underway and concrete signs of improvement are emerging.”

 

North American revenues inched up 1.7% to $121.9 million as gains in Timberland and SmartWool apparel and accessories offset the relatively flat performance in footwear. The PRO work line resumed growth with a 7% gain while SmartWool’s revenue grew by 4%, reflecting positive momentum in their respective markets and increased at-once orders.

 

North America wholesale revenue was relatively flat for the quarter. On the positive side, the gross margin rate in North America grew by 800 basis points on better inventory management.

 

On a conference call with analysts, Swartz said the North America region saw substantial growth in durable outdoor hikers not only in key accounts like Dick’s SG, Academy Sports, and Gander Mountain, but at outdoor specialty accounts, where sales have grown 10% in the last year. A successful fall 2009 launch with Saks Fifth Avenue was followed with some bold colors on classic 2-eye boat shoes this spring.

 

Investments in design talent have been employed for the Timberland Mountain Athletics collection.

 

Swartz said Timberland is particularly focused in North America on building SKUs at the “right doors” and finding success.  For instance, at Paragon Sports in Manhattan, Timberland increased its mix to 15 SKUs this quarter from three in Q109.

 

Retail revenue in North America was up 5%, thanks to a 3% comp store sales increase and an e-commerce business that was up 14% over last year.

 

Timberland’s overall results benefited from foreign exchange rate changes that increased first quarter 2010 revenue by approximately $10.8 million, or 3.7%, due to the weakening of the U.S. dollar relative to the euro and the British pound sterling.

 

Europe region revenue increased 8.7% to $151.6 million, or up 2.6% on a constant-dollar basis. Growth in every market where it operates, particularly the U.K., was partially offset by declines in distributor markets including Greece, Turkey, and the Middle East. SmartWool grew over 30% in Europe in the quarter. Both wholesale and retail channels showed strong growth in men’s and kid’s footwear. Hikers performed especially well; as did classic boot product, with both aided by the unusually cold weather across much of Europe during the quarter.

 

Overall, total Europe retail revenue increased 19%, driven by the benefit of foreign exchange rates and comp growth of 6% with double-digit comp improvement in both Spain and Germany. The turnaround of Timberland’s men’s apparel business emerged as a key area of strength for the European retail business, Swartz noted.

 

Asia revenue climbed 16.9% to $43.5 million, and increased 12.6% on a constant-dollar basis. The retail-dominant region benefited from clean inventories and early availability of Spring 2010 product as well as growth in its Earthkeepers and outdoor footwear collections. Revenue in China more than doubled and Taiwan posted double-digit growth.

 

Wholesale revenue in Asia was up 33%, driven by apparel and men’s footwear.

 

TBLs first owned and operated store in China opened during the quarter, and the company now has 100 Timberland brand locations in the country.

 

Global footwear revenue increased 6.6% to $225.5 million, driven primarily by improved wholesale results in Asia and Europe, benefits from foreign exchange, and higher comps globally. Apparel and accessories revenue increased 8.9% to $85.7 million due to revenue growth in Timberland retail stores in North America, Europe, and Asia, and increased sales through wholesale partners in North America and Asia.

 

Global wholesale revenue was up 6.1% to $231.9 million due to double-digit growth in Asia and positive growth in Europe. Worldwide consumer direct revenue increased 9.1% to $85.1 million, driven by comp store sales growth of nearly 5% and the opening of five net new stores since Q1 2009. It ended the quarter with 220.

 

Gross margins were up nearly 400 basis points, driven primarily by favorable product and business mix, less promotional activity at retail, and some product cost decreases. Operating expenses were essentially flat for the quarter.