After completing a “global retail portfolio review,” Timberland has decided to close approximately 40 of its larger, specialty retail stores in the U.S., Europe and Asia. TBL management said that this is part of a strategy to “redirect investment to higher return businesses, drive efficiencies across its organization and rationalize its operating expense structure.” Timberland also plans to close several underperforming U.S. outlet stores. The company will continue to operate about 200 retail doors globally, but will end up closing “most of our specialty retail stores in the United States.”
The majority of the store closures are expected to occur in the first several months of 2008, and the reduction in door count is anticipated to increase annual operating profits by approximately $6 million, while lowering annual revenues by approximately $40 million.
Timberland will incur pre-tax restructuring costs of approximately $17 million to cover non-cash charges related to property and equipment, severance and other costs associated with the retail store closures. It anticipates incurring costs of approximately $7 million in the 2007 third quarter, $8 million in the 2007 fourth quarter, and $2 million in early 2008.
As a result of the store closures and a recall of some Timberland PRO safety boots, the company revised its guidance for 2007s third quarter and full-year results. For Q3, Timberland expects revenue to decline in the low-teens and operating margins to decline approximately 600 basis points. For the fourth quarter, it anticipates relatively flat revenues and an operating margin decline of approximately 100 basis points excluding restructuring costs. For the full year, Timberland now anticipates revenue declines of approximately 5% and a 400 to 450 basis point operating margin decline compared to prior-year levels excluding restructuring costs.
