In the 3rd quarter, net income dropped by 25.0 percent to $69,152,000, on revenues that slid by 0.6 percent to $502,980,000. Revenues would have fallen further – by about 4.5 percent – without the company’s acquisition of Smartwool earlier this year and positive effects from foreign currencies. Sales outside of the USA were up by 7 percent in dollars to $255.0 million, with Southern Europe, Canada and Japan leading the growth, offset by poor performance in the UK, France and the Benelux countries.
Revenues within the USA dropped by 7.2 percent, due to large decreases in both boots and kids’ shoes. Sales in Europe were flat, while turnover in Asia increased by 13 percent. It was especially strong in Japan. Timberland opened six more company-owned stores in Asia during the quarter and three distributor-owned stores in China. The company plans to have a total of 15 new locations in the continent at the end of the year.
Global footwear sales fell by 8 percent to $368.0 million, partly because the classic Timberland boot, once fashionable among the urban youth, has become a thing of the past. Revenues from apparel and accessories instead increased by 28 percent to $129.4 million.
The company expects to eat another $3 million on the year because of the European Union’s anti-dumping duties against leather footwear from China and Vietnam, and this could pull Timberland’s full-year gross margin down by about 200 basis points. However, the company expects full-year net earnings to be flat.
On the positive side, Timberland has high expectations for the Russian market, where it is coming back with the opening of five shops. The company is also on the verge of opening its first two doors in India, specifically in Delhi and Mumbai. Timberland expects to open a total of 30-40 company-owned stores worldwide next year, while launching an e-commerce site that will service customers outside the USA.