NEW YORK — Timberland Co. reported a 30.9 percent decline in first-quarter earnings on a slight decline in revenues, which it attributed to soft boot sales and negative foreign exchange impacts.
The company also guided second-quarter revenues to be down in the midsingle digits with an operating loss of $20 million to $25 million. Timberland cited in part the impact of antidumping duties on European Union footwear sourced in China and Vietnam.
In the three months ended March 31, the Stratham, N.H.-based company earned $29.2 million, or 45 cents a diluted share, matching analysts' estimates. Comparatively, the company had a net profit of $42.3 million, or 61 cents, last year. Timberland noted that earnings per share in last year's quarter would have been 58 cents when including costs related to stock options and its employee stock-purchase plan.
"Gross margin pressures related to product mix changes and macro factors, investments in new business development and cost growth related to new accounting requirements for equity-based compensation contributed to an overall decline in reported earnings," Brian McKeon, chief financial officer of Timberland, said in a post-earnings conference call. "While we are pleased with our progress in developing Timberland's global business portfolio, we expect continued pressure on our U.S. boot business this year and are advancing proactive steps in a concerted effort to protect our brand, enhance trade margins and ensure a strong, long-term relationship with boot consumers."
Revenues in the first quarter declined to $349.8 million from $354.2 million a year ago, while domestic retail same-store sales fell 12.8 percent and global retail same-store sales dropped 10.8 percent. The company said net revenues were hurt by $12.9 million, or 3.6 percent, due to foreign exchange rate impacts, and that, on a constant exchange basis, the quarter's revenue was up 2.4 percent.
By segment, U.S. wholesale revenues rose 6.8 percent to $124.7 million, while U.S. consumer direct revenues were down 13.7 percent at $33.1 million. In total, U.S. revenues rose 1.7 percent and benefited from the acquisition of SmartWool and expansion in outdoor performance, casual and Timberland Pro series categories.
Internationally, revenues were $192.1 million, down 3.5 percent. On a constant exchange basis, international revenues rose 3 percent, helped by strength in Asia and Canada.By product, footwear revenues totaled $254 million, a decrease of 4.5 percent; apparel and accessories revenues rose 8 percent to $91.4 million, and royalty and "other" revenues combined were up 25.1 percent at $4.5 million. Timberland said it saw declines in boots, outdoor performance and kids' footwear and strength in men's casual and Timberland Pro series footwear during the quarter.
Regarding its second-quarter guidance, Timberland explained that, aside from the antidumping duties, it is taking steps to ensure balanced inventory positions for its retail partners in the U.S. boot business as well as expecting continued weakness in the U.S. boots business. Subsequently, the company forecast lower earnings in the second half of this year, saying third-quarter revenues will decline in the low-single digits with gross margins down 300 to 400 basis points.
In total for fiscal 2006, Timberland said EPS is expected to fall 20 to 25 percent with a flat to modest revenue increase.
Analysts are expecting EPS of $2.20 in the year and revenues of $1.63 billion.
Shares of Timberland closed down 10.8 percent at $30.82 Tuesday in New York Stock Exchange trading.
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