Declines in Timberland casual footwear & women boots biz

06 Feb '09

5 min read

The Timberland Company reported fourth-quarter 2008 net income of $13.1 million and earnings per share of $0.23. These results compare to fourth-quarter 2007 net income of $24.1 million and earnings per share of $0.40. When adjusted to exclude restructuring and related costs, earnings per share were $0.23 and $0.52 in the fourth quarters of 2008 and 2007, respectively.

Revenue declined 11.8% to $390.6 million for the quarter, reflecting the net closure of 28 retail stores globally, the transition to a licensing model for the Company's North American apparel business and declines in its global Timberland branded footwear and international apparel businesses, partially offset by continued growth in SmartWool and Timberland PRO. Foreign exchange rate changes decreased fourth quarter 2008 revenue by approximately $14 million, or 3.1%, due to the strengthening of the U.S. dollar.

North America revenue declined 13.4% to $230.6 million, reflecting soft consumer spending in the U.S. Europe revenue decreased 13.8% to $109.6 million but was relatively flat on a constant dollar basis. European results reflect declines in the casual footwear and apparel businesses, partially offset by strong sales of men's boots.

Asia revenue increased 2.3% to $50.4 million, but decreased 7.0% on a constant dollar basis, driven primarily by declines in the apparel business. Global footwear revenue decreased 7.6% to $281.2 million due to declines in the casual footwear and women's boots businesses, which offset strength in the men's boots business in the European and Asian markets as well as strength in Timberland PRO series footwear. Apparel and accessories revenue decreased 22.2% to $103.8 million, due in part to anticipated declines in Timberland brand apparel as a result of the Company's transition to a licensing model for its North American apparel business.

Global wholesale revenue decreased 10.9% to $257.3 million. Worldwide consumer direct revenue decreased 13.4% to $133.4 million, reflecting a difficult worldwide retail environment, revenue declines associated with the Company's decision to close certain underperforming retail locations and the impact of foreign currency translation.

The Company had restructuring and related credits of $0.1 million in the fourth quarter of 2008, compared to charges of $9.6 million for the fourth quarter of 2007, reflecting the substantial completion of the Company's 2007 restructuring programs.

Operating income for the fourth quarter of 2008 was $23.1 million, compared to $32.4 million in the prior year period. The 2008 fourth quarter included approximately $2.6 million related to a favorable legal settlement, a $1.9 million non-cash intangible asset impairment charge and severance costs of approximately $2.3 million related to the Company's ongoing initiatives to streamline its operations and rationalize its cost structure.

In the quarter, foreign exchange rate changes decreased operating income by approximately $5 million due to the strengthening of the U.S. dollar. Operating income for the fourth quarter of 2007 included the reversal of approximately $8 million in accruals, primarily related to incentive compensation as its annual performance fell below minimum requirements.

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