NEW YORK – Declines in its boot business, only partially offset by gains from its SmartWool acquisition and favorable currency conditions, helped send The Timberland Co. to a nearly two-thirds drop in its first quarter profits.
The company also forecast a second quarter loss with the drop-off in both boots and kids’ footwear expected to continue throughout the year.
Late Wednesday, the Stratham, NH-based company reported that, in the three months ended March 30, net income fell 64.5% to $9.3 million, or $0.15 a diluted share, from $26.1 million, or $0.40, in the restated year-ago quarter. Excluding restructuring expenses, such as the decision to license its North American apparel business to Phillips-Van Heusen, EPS was $0.22, higher than the $0.18 expected by analysts.
Revenues dropped 3.9% to $336.3 million from $349.8 million in the 2006 quarter as footwear revenues fell 7.2% to $235.6 million. US wholesale volume was off 17.4% to $105.2 million. Foreign exchange rate changes added $11.8 million to top-line results, without which sales would have fallen $25.3 million.
Among the quarter’s bright spots were a 19.8% increase in volume in Asia, to $37.7 million, and a 1.9% increase in same-store sales at its domestic retail units.
Gross margin dipped to 48% of sales from 49.7% in last year’s period.
The company projected a second quarter loss of $18 million to $20 million, excluding restructuring costs, with lower boot and kids’ sales expected to lead to a 300 to 350 basis point erosion in operating margins for the year, again excluding restructuring costs.
“We continue to broaden our portfolio with acquisitions such as SmartWool, GoLite, Howies and IPATH so that we can reach more consumers than ever before,” said Jeffrey Swartz, president and chief executive officer of Timberland. “We are more focused than ever on creating authentic and relevant product for our targeted consumers, and we are streamlining our business operations in order to drive greater efficiencies.
“While I am not satisfied with where we stand today, I am encouraged by the strength of our new management structure, our strategic focus and the resolve of our employees and believe that we are positioning ourselves to make important progress in the future,” Swartz concluded.