Timberland Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rugged-footwear maker Timberland (NYSE: TBL  ) got absolutely stomped by the market today, losing as much as 31% in intraday trading after the company reported first-quarter results.

So what: On the bright side, Timberland's top line moved in the right direction. Total revenue was up 10% year over year to $349 million on same-store-sales growth of 8.2%. The sales tally did, however, fall short of Wall Street's $361 million target. The bigger issue in the quarterly report was that the company reported a surprise 30% drop in net income. Earnings per share for the quarter clocked in at $0.35, down from $0.47 in the first quarter of last year and badly missing analysts' $0.59 target.

Now what: Costs were up across the board for Timberland. As compared with last year, the company's gross margin fell to 46.8% from 49.8%, while operating costs as a percentage of revenue rose from 37.4% to 38.8%. Based on the company's press release, it seems that both of these areas could continue to be issues through the remainder of the year as product costs stay elevated and the company makes growth-oriented investments. Timberland does, however, hope to offset some of the product costs with price increases later in the year.

Timberland is part of the Rising Stars Portfolio for my fellow Fool Alyce Lomax, and a month ago she was still intent on holding her shares despite a somewhat elevated price. Although this quarterly report is certainly troubling, from a bigger-picture view, it may be more of a fender-bender for the company as opposed to show-stopping collision.

Want to keep up to date on Timberland? Add it to your watchlist.

The Motley Fool owns shares of Timberland, which is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.         

Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 05, 2011, at 4:53 PM, cattywampus wrote:

    I feel like I got drunk on profits, partied to hardy, passed out and woke up to find someone had kicked the $@>/ out of me with a big pair of boots.

    Liked your use of stomped. I'm going out to buy a pogo stick right now. Bounce, bounce, bounce

    Hard to complain to much when we saw the price rise so far so fast.

  • Report this Comment On May 06, 2011, at 2:43 PM, N18996 wrote:

    My 25% trailing stop order kicked in so I sold out at $32. Imagine my surprise that this happened in one trading session. I made a 68% gain so I think I'll take it and invest elsewhere. Love those trailing stop orders.

  • Report this Comment On May 09, 2011, at 12:10 AM, phoebe44 wrote:

    Those insider sales bothered me back in Feb and March --- say what you want about them and that the owners and directors can and do take them as they please but if you look at TBL insider sales it just looks too obvious - too obvious to be legit - IMHO. I steered clear of this one and am glad I did -- but, good for you, N18996! 68% is pretty cute!

  • Report this Comment On May 10, 2011, at 8:49 PM, TruffelPig wrote:

    The trailing stop at -25% sits way to far away from the price for being useful. I bought shares at 32 because it was clear that such a drop is an over-reaction! One can nearly always count on wall street to over-react, both to up- and down-side. The "good contrarian" knows that and buys the over-reaction, in this case shares of a fundamentally solid and good company. Actually, I sell on any given 10% loss under my purchase price. If necessary, I buy back lower later or not. I usually sell at 25% gain in 1 month (rockets will come back).

    I fundamentally like Timberland because they are green!

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