TIMBERLAND NET UP 63.5%
Byline: Evan Clark
NEW YORK — Strong apparel sales, both at home and abroad, helped drive The Timberland Company’s solid third quarter and have the company eyeing the expansion of its North American apparel business.
Net income for the quarter rose 63.5 percent to $57.5 million, or $1.35 a diluted share, against $35.1 million, or 81 cents, in the year-ago period.
Revenues for the quarter ended Sept. 29 rose 20.7 percent to $375.2 million compared to $310.9 million a year ago.
Results reflect Timberland’s February acquisition of four Asian subsidiaries and its August purchase of Taiwanese assets from Inchcape PLC, its former distributor for the Asia-Pacific region. Excluding the impact of these acquisitions, revenue for the third quarter increased 15.2 percent.
Jeffrey B. Swartz, president and chief executive, noted in a release that third-quarter results reflect the company’s focus on “core strategic objects.” These consist of building Timberland into an integrated, global lifestyle brand; developing a corporate culture focused on speed and service, and transforming community partially through involvement in various charities.
He also noted that the company is “well positioned to deliver against its full-year financial objectives,” which include its goals of delivering double-digit revenue growth, increasing earnings at a faster rate than revenue and generating strong positive cash flow.
By business segment, revenue results were as follows:
Domestic sales, driven by robust wholesale revenues in its footwear and apparel segments, grew 22.5 percent to $272 million.
International revenues of $103.2 million reflected a 16.2 percent increase.
Domestic retail revenues, included with domestic sales, increased 12.8 percent to $53.6 million and 1.5 percent on a comparable-store basis.
Apparel and accessories revenues worldwide were up 36.5 percent to $73.6 million against $53.9 million in the third quarter of 1999.
Timberland said its apparel business is showing broad-based growth at both its U.S. wholesale division and the more developed European division. On a conference call, Swartz said that apparel, key to the development of Timberland as a lifestyle brand, was driving demand. It also has elevated sell-throughs at Federated Department Stores divisions such as Macy’s East, The Bon Marche and Rich’s.
Referring to the strength in the company’s apparel business, Swartz said, “On the basis of that kind of a result, we can start to think about how to build a distribution system where we can access the consumer more broadly across North America.”
The company has been focusing on investing in a stronger trade presence by building a distribution network. Once that has been accomplished, it will turn to remerchandising and improving costs and margins in its apparel business, Swartz said.
Brian McKeon, senior vice president of finance and administration and chief financial officer, said on Thursday’s conference call that “excluding the impact of Asia, international revenue declined 3 percent, driven by the unfavorable impact of declines of the euro and the pound versus the U.S. dollar.” On a constant dollar basis, sales rose 10 percent.
“European sales gains reflected continued gains in our apparel business and benefits from the successful rollout of our Mountain Athletics line,” he said. The sub-brand, launched last year, added a quarterly magazine called Mountain Athletics during the quarter.
McKeon also noted, “We intend to leverage the strength and diversity of our business portfolio to offset negative impacts such as [currency weaknesses] as we’ve done so far this year.”
For the nine months, net income was up 78.7 percent to $81.1 million, or $1.90 a diluted share, against $45.4 million, or 1.02 a share, a year ago. This year’s nine months include an after-tax charge of $2.1 million due to the prepayment of $100 million in senior notes. Revenues for the period were up 18.7 percent to $760.9 million compared to $640.8 million in the year-ago period.
Timberland’s board of directors authorized the repurchase of an additional four million shares of the company’s class A common stock. The new plan supplements the previous authorization to purchase four million shares of which 468,000 shares remained outstanding at the end of the third quarter.
The firm’s stock closed at $42.13 Friday, nearing its 52-week high of $44.50, reached Aug. 22. The 12-month low is $18.13, reached in February.