The Timberland Company Q1 2010 Earnings Call Transcript

The Timberland Company Q1 2010 Earnings Call Transcript
By Seeking Alpha ,

The Timberland Company (TBL)

Q1 2010 Earnings Call

April 29, 2010 8:25 am ET

Executives

Jeffrey Swartz – President & CEO

Carrie Teffner – CFO

Kaitlyn Bruder - IR

Analysts

Tom Shaw – Stifel Nicolaus

Mitch Kummetz – Robert W. Baird

Kate McShane – Citigroup

Sam Poser – Sterne Agee

Jonathon Grassi – Longbow Research

Chris Svezia – Susquehanna Financial

Presentation

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You are listening to The Timberland Company’s first quarter 2010 analyst conference call. (Operator Instructions) Now for opening remarks, I’ll turn the call over to Kaitlyn Bruder, Timberland’s Investor Relations Department.

Kaitlyn Bruder

Good morning and welcome to Timberland’s first quarter 2010 conference call. Speaking today will be Jeffrey Swartz, our President and Chief Executive Officer and Carrie Teffner, our Chief Financial Officer. Carrie will be discussing our financial results for the quarter. Jeffrey will then discuss our performances within the context of our longer-term strategic direction.

This presentation includes and our responses to your questions may include statements about the company’s future expectations, plans, and proposals which constitute forward-looking statements for purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any such statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are discussed in today’s press release and in the company’s filings with the SEC. Copies of our SEC reports are available upon request from Timberland.

This presentation also includes discussion of constant dollar revenue change a non-GAAP financial measure. As required by SEC rules, we have provided a reconciliation of this measure in today’s press release and on the Presentation tab found on the Investor Relations section of our website, www.timberland.com.

Thank you, and now I’ll turn the call over to Carrie.

Carrie Teffner

Thank you Kaitlyn, this morning we reported a solid start to the fiscal year with top line growth in all regions, substantial margin improvement, a significant increase in earnings per share, and a solid balance sheet.

During the call last quarter I told you that our performance in the second half of 2009 was an indication that our fundamentals were improving. Its clear that our disciplined approach to managing our cash and inventory has positioned us well for 2010.

While some of our gross margin improvement was driven by favorable product costs and foreign exchange benefits, we also experienced significant gains from minimizing markdowns and a mix of higher margin product.

Before I go into more detail I would like to comment on our decision to shift away from discussing our business in terms of boots, casual, and performance. You may have noticed this in the earnings release this morning.

Our business has evolved in recent years and those once narrowly defined categories of boots, casual and performance have become less rigid. We want to be very clear about what is driving the business and we believe the most effective way to report to you is to mirror the way we manage the business, which is by geography, product grouping which includes footwear, apparel, and accessories and channel.

We intend to provide this level of detail on a consistent basis. In each quarter we will also include supplemental product lines, gender, and brand highlights where appropriate to help articulate the drivers for the quarter.

As we have done in previous quarters, we will also continue to update you on progress against what we call our big ideas, important product, and marketing initiatives such as Earthkeepers and Timberland Mountain Athletics. In a moment Jeffrey will discuss the strategic progress we are making in each region, but first I’ll walk you through the results of the first quarter.

Revenue for the quarter increased 7% to $317 million and increased 3% on a constant dollar basis reflecting growth across North America, Europe, and Asia and favorable foreign exchange rate impacts.

For the quarter exchange rate changes increased global revenue by approximately $11 million due to the weakening of the US dollar relative the euro and the British pound. Global footwear revenue increased 7% to $226 million from the first quarter of 2009 and apparel and accessories revenue increased 9% to $86 million.

By channel global wholesale revenue was up 6% to $232 million due to double-digit growth in Asia and positive growth in Europe. Worldwide consumer direct revenue increased approximately 9% to $85 million driven by comparable store sales growth of nearly 5%.

In North America revenue increased 2% to $122 million driven by Timberland and SmartWool apparel and accessories. Footwear revenue was relatively flat versus the prior year. PRO posted strong results with 7% revenue growth in the first quarter of 2010 and SmartWool revenue grew by 4% reflecting positive momentum in their respective markets and an increase in at once orders during the quarter.

North America wholesale revenue was relatively flat for the quarter. Retail revenue was up 5% with a 3% increase in comparable store sales and our North America ecommerce business was up 14% over last year.

In Europe revenue for the quarter increased 9% to $152 million and increased 3% on a constant dollar basis. Growth in every market where we operate and in particular the UK was partially offset by declines in certain distributor markets including Greece, Turkey, and the Middle East.

SmartWool continued its European expansion growing the revenue by over 30% in the first quarter. Both wholesale and retail channels showed strong growth in men’s and kid’s footwear. Overall total Europe retail revenue increased 19% driven by the benefit of foreign exchange rates and comparable store sales growth of 6% with double-digit comp improvement in both Spain and Germany.

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