Timberland posts impressive profits despite static sales

Timberland posts impressive profits despite static sales

Strong full-year margins and profit growth at Timberland today (4 January) redeem static overall revenue growth at the outdoor firm and sluggish domestic demand for its boots.

Timberland admits that sales growth isn't quite up to scratch, and is adopting a three-pronged attack to stem the flow, through its Outdoor, Earthkeepers and Classics categories.

"I like the fact there is only three ideas and not ten," Timberland CEO Jeffrey B Swartz tells analysts in a webcast today (4 February).

Timberland's full-year income of $56.6m, up 24% from $42.9m last year, comes despite a 6% drop in annual sales. The rise in profits is largely thanks to improved margins, driven by supply chain savings and benefits from foreign exchange.

Furthermore, the company ended the quarter with $289.8m in cash and no debt, meaning it does pay out on interest charges.

However, it also faces the challenge of tailoring its brand to different international markets.

During the fourth quarter North America revenue fell 6.5% to $215.7m, while Europe revenue increased 17.1% to $128.4m, and Asia revenue fell 13.4% to $43.6m.

Its North American dip was partly due to a decline in Timberland's boots business, and the company needs to replicate the broader portfolio of its European and Asian boot business - where it includes boat shoes and hiking boots - closer to home.

Timberland is not providing an outlook for 2010 just yet, but Swartz says retail performance during the second half of 2009 should help the order book come April. "Our brand has a little more momentum and that is good news," he says.

"This year retailers are chasing sales but there is less of this raw panic in their business," Swartz adds. "If two years ago it was business as usual, last year was "we are all going to die", then this year is somewhere in between."

He is also buoyed that retailers and brands share a common belief this year that leaner is better and that markdowns are a bad thing.

Timberland will also need stores in North America to keep belief in its flagship boots going forward.