Timberland’s Q1 Earnings Jump 62%

Foreign exchange rate changes 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.

North America revenue increased 1.7% to $121.9 million compared to the prior year period, driven by growth in apparel and accessories. Europe revenue increased 8.7% to $151.6 million versus 2009 first-quarter levels, and increased 2.6% on a constant dollar basis. Benefits from foreign exchange and double-digit growth in the UK and Italy, the company’s two largest markets in Europe, were partially offset by declines in the European distributor business. Asia revenue increased 16.9% to $43.5 million compared to the prior year period, and increased 12.6% on a constant dollar basis. Revenue in China more than doubled compared to the prior year period and Taiwan posted double-digit growth for the quarter.

Global footwear revenue increased 6.6% to $225.5 million from the first quarter of 2009, driven primarily by improved wholesale results in Asia and Europe, benefits from foreign exchange, and higher comparable store sales globally. Apparel and accessories revenue increased 8.9% to $85.7 million compared to the prior year period, 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. Royalty and other revenue decreased 8.7% to $5.8 million compared to the prior year period primarily due to a decline in licensed kids apparel in Europe.

Global wholesale revenue was up 6.1% to $231.9 million compared to the prior year period, due to double-digit growth in Asia and positive growth in Europe. Worldwide consumer direct revenue increased 9.1% to $85.1 million from the first quarter of 2009, driven by solid comparable store sales growth. Comparable store sales were up 4.5% compared to the first quarter of 2009 in specialty and outlet stores across North America, Europe, and Asia. The company had 220 stores, shops, and outlets worldwide at the end of the first quarter of 2010 compared to 216 at the end of the first quarter of 2009.

Operating income for the first quarter of 2010 was $39.4 million compared to operating income of $18.2 million in the prior year period. This improvement in operating income was driven by an increase in gross margin primarily due to favorable product and channel mix, benefits from foreign exchange, and lower product costs.

In the first quarter of 2010, the effective tax rate was 34.3% compared to 11.0% in the first quarter of 2009. The tax rate for the first quarter of 2009 reflected a non-cash tax benefit of $6.4 million from the reversal of specific tax reserves due to the closure of certain tax audits.

In connection with its stock buyback program, the company repurchased approximately 1.0 million shares in the first quarter of 2010 at a cost of approximately $20.0 million.

The company ended the quarter with $238.5 million in cash and no debt. Accounts receivable decreased 8.5% to $157.6 million compared to the prior year period, due to strong collections in all regions. Inventory at quarter end was $136.9 million, down 15.9% versus 2009 first-quarter levels, reflecting the company’s continued focus on working capital.

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “We have had a solid start to 2010 and we are pleased to see that our product and brand initiatives are gaining traction. Our focus on these strategies is beginning to translate to top-line growth, and while we are encouraged by our revenue growth and earnings improvement, we are cautious about the pressures we are seeing on input costs such as leather and transportation as well as labor costs in China. That said, our financial and operational discipline allows us the flexibility to expand targeted growth initiatives. By re-asserting our heritage strength in the outdoor category and finding unique ways to link value and values in products like our Earthkeepers™ line, we continue to position Timberland for long-term success.”