The Timberland Co.: Boot Sales Wearing Down

Declining boot sales lead to poor second-quarter performance for environmentally conscious footwear and apparel company.

It appears The Timberland Co. needs to make a new fashion statement. The Stratham, N.H.-based boots and apparel maker has been struggling lately in the U.S. as the company's popular work boots have fallen out of style with young, urban consumers who had embraced them, according to Reuters.

Timberland -- one of one of IndustryWeek's IW 50 Best Manufacturers for 2006 -- posted a second-quarter loss of $13 million, or 21 cents per share, compared with a $6.3 million, or 9 cents per share, profit a year earlier. Total revenue decreased 5.7% to $226 million while U.S. revenue fell 10.9%, primarily from declines in U.S. boots and children's footwear sales.

Those losses offset a 1.1% increase in international revenue, which was driven by the addition of the company's SmartWool brand and the expansion of its PRO series footwear and men's casual footwear and apparel. For the third quarter, the company expects flat revenue growth and gross margin declines of 4 percentage points.

Timberland is targeting high single-digit revenue growth and more moderate gross margin pressure for the fourth quarter.

The company will continue to expand globally, which will likely contribute to low double-digit second-half operating expense growth.

"As anticipated, we saw pressure on our overall results, impacted in part by proactive steps taken to maintain Timberland's premium brand positioning," said Timberland President and CEO Jeffrey Swartz in a July 26 statement. "Our strategy remains intensely focused on building a global portfolio of premium brands sharing standout values by providing innovative, authentic solutions for consumers. . . . We believe the development of our global business portfolio will provide a strong foundation for sustaining our long-term growth and building Timberland's value as a brand and enterprise."

Timberland's recent struggles haven't distracted the company from continuing to embrace environmental and social causes. In July, the company made its 2005 social responsibility report publicly available. Some highlights from the report include Timberland's efforts in global human rights, environmental stewardship, community involvement and employee engagement. The report is available at www.timberland.com/csrreport.

Timberland Co.
At A Glance


Timberland Co.
Stratham, N.H.
Primary Industry: Apparel
Number of employees: 5,300
2005 In Review
Revenue: $1.6 billion
Profit Margin: 10.5%
Sales Turnover: 2.0
Inventory Turnover: 5.3
Revenue Growth: 4.3%
Return On Assets: 21.7%
Return On Equity: 32.1%

In April, the company celebrated Earth Day by sponsoring habitat-restoration and water-conservation projects in 26 countries. Nearly 7,000 volunteers served an estimated 46,000 hours in communities where the company's retail stores, factories and distribution centers are located. The event also included the unveiling of the company's solar power array at its Ontario, Calif., distribution center. The solar array will generate approximately 60% of the facilities power and will reduce its output of greenhouse gases by 480,000 pounds of carbon emissions. The solar array is one of the world's 50 largest solar panels and the first in California's Inland Empire region in the southern part of the state, according to Timberland.

Earlier in the year, Timberland said it would begin placing "nutritional labels" on individual product boxes that tell consumers where the product was manufactured, how it was produced and its impact on the environment.

Timberland's involvement in environmental activities earned the company recognition from Business Ethics Magazine as a "100 Best Corporate Citizen." The magazine ranked Timberland sixth overall, making it the only footwear company in the top 10, according to Timberland.

"Conducting our business in the most socially responsible manner and driving positive change in the industry and in the communities we operate in will continue to be among our top priorities," said Swartz in a May 1 statement.


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