Timberland Beats Expectations, Posts Record Earnings

Timberland Co. (TBL) posted record first-quarter earnings on Tuesday, exceeding analysts' estimates by about 20 percent.

Solid sales for its trademark boots in the United States and abroad were boosted by favorable exchange rates, and its stock price hit an all-time high.

The shoemaker also said it saw lower earnings in the current quarter as operating expenses rise, but added it continued to target low to mid single-digit revenue growth and double-digit EPS gains for the full year.

"Given the positive earnings surprise, we suspect that the guidance implies greater double digit EPS growth than previously suggested," D.A. Davidson & Co. analyst Mitch Kummetz said in a research note.

Shares in Timberland rose 9 percent, or $6.30, to $76.29 on the New York Stock Exchange (search). Earlier it hit $76.49, its highest ever.

First-quarter net income rose to $42.2 million, or $1.22 a share, from $31.1 million, or 87 cents a share, a year earlier.

Analysts, on average, had expected the Stratham, N.H.-based company to earn 98 cents a share, according to Reuters Estimates.

"On first glance it looks pretty good in that there's strength across the board for the brand. Management is being conservative with the second quarter, which is a strong reorder quarter for them," Angelique Dab, an analyst at Monarch Research said, noting this was a normal stance for management.

Revenue in the first quarter rose 10.1 percent to $354.2 million, reflecting solid growth in footwear and apparel. Favorable foreign exchange rates added $7.4 million, or 2.3 percent.

Timberland said it sees flat to modest sales and gross profit gains in the second quarter, hurt by an earlier spring order flow and anticipated pressure on U.S. results from shifts toward more seasonal products.

The second and third quarters tend to be weaker for Timberland and the company is trying to move into other offerings like sandals, Dab said. She noted sales of those products may begin more slowly because consumers in general held back spending through Easter and the tax season.

"I don't see this as a weakness to the story long-term. Now we see a lot more bags in the mall and more lines at the registers," Dab said. "So I feel pretty comfortable saying I believe that overall the sales are going to be OK for this quarter."

Timberland said it expects operating expenses in the second quarter to grow in the high single-digits, reflecting global business development and investments against spring sales initiatives.

"While these investments will push second-quarter earnings below the prior-year level, they reflect the company's commitment to expanding its global presence and developing the Timberland brand as a year-round resource," the company said in a statement.

According to Reuters Estimates, analysts are expecting, on average, second-quarter earnings per share of 22 cents and second-quarter revenue of $237.76 million.

In the 2004 second quarter, Timberland earned $7.9 million, or 22 cents a share. For the full year, analysts are expecting, on average, earnings per share of $4.80.