The Timberland Company

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The Timberland Company

founded: 1955 as the abington shoe company; becamethe timberland company in 1978

Contact Information:

headquarters: 200 domain dr.
stratham, nh 03885 phone: (603)772-9500 fax: (603)773-1640 toll free: (800)445-5545 email: [email protected] url: http://www.timberland.com

OVERVIEW

The Timberland Company designs, engineers, markets, and distributes high-quality footwear apparel and accessories in more than 90 countries worldwide through independent retailers and better grade department and athletic stores, in addition to its own retail locations. In addition to its strong company goals of producing high-quality products delivered at exceptional value, Timberland focuses much of its effort and concern on social issues that affect both its target markets and the overall community.

The Timberland motto: "boots, brands and belief" permeates the company at all levels. Under the leadership of Sidney and Jeffrey Swartz, Timberland has juggled these two concerns and built an organization that employs over 6,000 persons worldwide, makes the finest in waterproof boots and footwear, and inspires community service in not only their employees but, wherever their presence is felt.

COMPANY FINANCES

Timberland's products are sold to a diverse customer base—urban, suburban, and rural communities with an 18 to 30 age demographic. Timberland's goal is to provide tough, durable, and comfortable outdoor wear. Because Timberland took precautions and was able to reduce prices, thereby driving up sales during the outdoor craze of the early 1990s, it has ensured its survival through any changes that occur in the supply and demand of its products in the future.

Over the past five years the outdoor apparel craze has created a steady market, and Timberland's sales have risen. Revenue derived from footwear totaled $593.0 million in 1997; revenue attributable to apparel and accessories reached $193.8 million. Since 1989 Timberland's revenues have increased 80 percent to reach $796.5 million in 1997, 73 percent of which was generated in the United States. From 1996 alone, the company experienced a 15.4 percent growth in revenue. Timberland stock ranged from a low of $37.75 to a high of $82.78 in the 52-week period in 1997. The annual dividend was $4.20 per share. Financial goals for Timberland are pursuing profitable revenue growth, with an emphasis on growing earnings at a faster rate than revenue; generating positive cash flow; improving gross margins; and controlling operating and capital expenditures.

ANALYSTS' OPINIONS

According to Boston Magazine, analysts who follow Timberland think that the company "has sacrificed profit for the sake of growth." They fear that in its rush to reach the billion-a-year sales category, reduced prices on Timberland's best selling items will only weaken the company. The attitude is that the shoes are good, but the stock is a risk.

HISTORY

In 1955 Nathan Swartz completed his purchase of the Abington Shoe Company in Abington, Massachusetts, and brought his sons, Herman and Sidney, into the new family concern. Over the next 10 years, the Swartz family developed a revolutionary new type of boot that fused soles to upper leathers without stitching, thereby producing the first truly waterproof boot and shoe. This type of footwear was ideal for workers who spent their time in the outdoors and needed footwear that kept their feet dry and comfortable. In 1973 they began branding these boots with the "Timberland" name as a reflection of the rugged, long-lasting, outdoor quality these boots and shoes portrayed.

In 1978 the Abington Shoe Company name was officially changed to "The Timberland Company." This same year Timberland developed the first casual shoe with the same sole-infused technology that made their boots so successful. By the following year Timberland made its first boat shoe, thereby opening up the fishing and sailing markets.

Sidney Swartz bought out his older brother Herman in 1986 and became the sole proprietor of the business in 1986. Within two years Timberland introduced a line of men's clothing and the remarkable Hydro-Tech self-draining boat shoe. These activities began to broaden Timberland's appeal, and by 1990 women's apparel was introduced to the line.

Meanwhile, Timberland was also cultivating the international market, beginning with Italy in 1979. Timberland's product sales were so extensive that by 1986 the company had won the President's "E" Award for Export Excellence, securing Timberland's position as a dynamo among U.S. and international businesses.

Throughout the 1980s and 1990s Timberland continued to grow and expand their product lines and services. The early 1990s saw the creation of the professional Mukluk boot that was worn by the 1990 Iditarod Trail sled dog racers. This controversial race, wherein animal activists protested the harsh and often inhumane treatment of the sled dogs, was a problem for Timberland. On the one hand the boots worked exceptionally well, but on the other, the mistreatment of the animals was contrary to Timberland's philosophy and civic concern. In subsequent years, Timberland was able to improve race conditions and ensure the well being of the sled animals, but the controversy did lead to the company's quietly dropping sponsorship within a few years. Timberland is no longer associated with the Iditarod Race.

In 1989 Timberland was no longer merely a family concern, since it was being traded on the New York Stock Exchange. Two years later Jeffrey Swartz, son of chairman Sidney, was named chief operating officer, while Sidney was promoted to chief executive officer. With the new management team in place, the focus of Timberland shifted slightly to include a more active community service perspective. Meanwhile, the company was also developing a new line of high-tech boots, shoes, clothing, and accessories for consumer consumption. In 1993 a new line of women's leather footwear and clothing were introduced along with updated men's clothing and footwear. At age 37 Jeffrey Swartz became CEO of Timberland in 1998, while his father remained as chairman of the board. The Swartz family still owns about 55 percent of the company.

STRATEGY

Timberland's growth strategy depends on constantly improving their quality-driven products, increasing sales and outlets through their own retail stores, and licensing their products. To accomplish this, the company focuses on five key areas—product, distribution, marketing, business systems, and community. Timberland believes the success of this combination equals success for the company.

In 1998 Timberland looked to continuing improvement in the distribution of the products to retail and outlet stores. Improved inventory management will allow the company to have the products that are "hot" in stock and ready to go. The business systems segment helps the company be responsive to customers' needs and preferences around the world. Timberland's plans to improve its business systems should allow the company to deliver products in an even more cost efficient way.

Timberland's marketing reflects the company's commitment to making "boots that last forever" as Ken Freitas, director of marketing told Seacoast Times. This quality of "bootness" is the hallmark of the entire company. Every product Timberland makes must fit within the concept of long-wear, quality, and performance. Since many of the waterproof boots, one of the first products created by the company, are still in existence, this is a high standard to maintain. Advertising also reflects the outdoor, rugged quality of the Timberland product, with models chosen from regular people who actually use the products and appear comfortable in the outdoors, as opposed to models who really only look as if they belong on a runway. The advertisements of the 1970s were typical of what the company sought, a refreshing "truth in advertising" tagline: "A whole line of leather boots that cost plenty and should."

FAST FACTS: About The Timberland Company

Ownership: Timberland is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: TBL

Officers: Sidney Swartz, Chmn., 62, 1997 pay $1,721,561; Jeffrey Swartz, Pres. & CEO, 38, 1997 pay $1,141,854; Gregory W. VanWormer, Sr. VP & General Manager, Marketing, 42, 1997 pay $796,591; Geoffrey J. Hibner, Sr. VP Finance & Admin. & CFO, 48, 1997 pay $688,482

Employees: 6,000

Chief Competitors: Because of its stand in both manufacturing and retailing of its products, Timberland competes with other multinational companies who manufacture and sell boots; shoes; and men's, women's, and children's apparel. Some of Timberland's main competitors are: Birkenstock; Columbia; L.L. Bean; Rockport; Nike; and Reebok.

Timberland uses strategic marketing to show customers it cares about them and the world. The company ran an ad campaign against racism both in Germany and the United States. According to Freitas, in Germany a Timberland employee of Ethiopian background was subjected to hate crimes by local youth. Timberland used its billboards to mount a campaign with the classic Timberland workboot superimposed over headlines with the tagline "Give Racism the Boot" as a statement of protest over the actions. The campaign was so successful in Germany that it was introduced to the United States the following year.

INFLUENCES

For all its marketing savvy, like being the first boot manufacturer to advertise on national television and by its biannual magazine for outdoor enthusiasts, there are times when Timberland's executives managed to alienate much of their target audience. This occurred, according to Boston Magazine, when it was perceived that Timberland seemed to be distancing itself from African American buyers. It was noticed that "drug dealers in New York were purchasing boots at their neighborhood stores. Initially they were attracted to the boots because they needed something to keep their feet warm and dry while standing outside in harsh weather hawking dime bags. . . . The name Timberland, or Timbos, even started popping up in rap and hip-hop lyrics. . . ."

At the same time, Timberland began to cut styles and reduce stores that carried the lines; many of these stores were in urban communities. The company refused to provide free merchandise to singers for music videos. It was perceived that these moves were an attempt on the part of Timberland to lump all African Americans into the negative urban stereotype personified by alleged drug dealers. Jeffrey Swartz further stumbled when he denied these allegations and hidden motivations when he told The New York Times that Timberland would spend its advertising dollars on "honest working people," thereby implying that all African Americans were not. Even with Timberland's active stance against racism, such as the international "Give Racism the Boot" campaign and other socially responsible policies and decisions, these remarks and decisions alienated many in the African American community and even caused many of the offended to launch a boycott of the products.

CURRENT TRENDS

While the 1990s have been exemplified by the "outdoor apparel craze," Timberland has wisely not sold items outside its brand, according to Seacoast Times. It maintained an integrity to the type of product that made it a household word and because of this, even though the outdoor apparel trend has subsided, it will nevertheless maintain the same quality of product that formed its reputation in the first place.

PRODUCTS

Active Comfort Technology (ACT) revolutionized climate controlled footwear and performance apparel for outdoor use in 1994. In 1996 and 1997 Timberland expanded its markets to include a new line of children's footwear, apparel, and accessories. Watches, legwear, gloves, and leather care products such as belts and handbags are all standard items in the Timberland inventory. Along with its well-known yellow Timberland boots, these products have set the standard for high-quality outdoor apparel.

In 1998 Timberland planned to concentrate on offering men's apparel that coordinates with the footwear line. Women's apparel is offered in a limited way in the United States and international markets. While plans do not include dramatic expansion in the women's apparel line, the company is looking to possibly license its name to outside manufacturers. The company introduced boys' clothing in 1997 and planned to expand on that line in 1998.

CHRONOLOGY: Key Dates for The Timberland Company

1952:: Nathan Swartz purchases 50 percent of Abington Shoe Company
1955:: Swartz purchases the remaining 50 percent and brings his sons into the business
1965:: The company invents its "injection molding" procedure for making waterproof boots
1973:: Markets the first Timberland boot
1978:: Abington Shoe officially becomes The Timberland Company
1980:: The company goes international with the launch of Timberland in Italy
1986:: The first Timberland store opens
1988:: Begins producing a line of men's clothing
1991:: Timberland is traded on the New York Stock Exchange
1993:: New line of women's wear and shoes introduced
1997:: Timberland records its highest revenues ever at $797 million

CORPORATE CITIZENSHIP

Timberland has made a major impact in the realm of community service. As the third part of the "boots, brand and beliefs" motto, a concentrated effort by Timberland management and employees to return to the communities that have supported them is a major company goal. Timberland signed the Coalition for Environmentally Responsible Economics (CERES), a set of 10 environmental ethics principles to prevent environmental degradation and aid corporations to set environmental policy. Timberland recycles all items from fleece remnants, leather, and materials, and the company donates these items to the homeless, museums, and other organizations that need the materials. They restore hiking trails in New Hampshire and in the Alps, and they even developed a high-tech boot that causes less damage to the environment when used by hikers.

Perhaps the most significant program in which Timberland participates is their sponsorship in the City Year initiative, a Boston-based youth "urban peace corps" and model for national youth service. The company began supporting the program in 1987 and continues to support both in the Boston area and six additional areas added over the years. Timberland is so committed to this concept that employees are given 40 hours of paid leave each year to participate in a community service project.

GLOBAL PRESENCE

Timberland products are manufactured and sold in more than 90 countries. Unlike many companies seeking cheap foreign labor for their shoe manufacturing, Timberland's international employees enjoy the same benefits as their American counterparts. Timberland has six operating divisions in England, France, Spain, Italy, Austria, and Germany with distributors in the Asian-Pacific region, South America, the Middle East, and Africa. Twenty-four retail stores scattered throughout the United States and Europe operate under the supervision of the company. Concept stores and licensed flagship specialty stores are in 12 international markets including Japan, Hong Kong, Greece, and Korea.

EMPLOYMENT

Timberland has more than 6,000 employees worldwide in both its manufacturing and retail outlets. Wholesale sales personnel are required to build two pairs of boots so they can understand the process and be able to wholeheartedly support what they are selling. The philosophy that "even though we are traded on the NY Stock Exchange, we are still a family company" according to marketing director Keith Freitas, permeates the entire organization. Although a casual dress code at Timberland is encouraged, the company also strives to achieve the paramount level in production technology and service. Additionally, in 1995 Timberland employees contributed more than 12,000 hours in community service.