Get to know a company in less than 5 minutes: That's what a 5-Minute Breakdown is all about. If you're new to Timberland (NYSE: TBL), consider this your Foolish way to get introduced and in the know.
What it does
Timberland makes boots. It makes outdoor boots, such as for hiking, and specialized workboots, such as steel-tipped boots required for certain construction jobs. Sure, it also makes some other outdoor gear, such as Smartwool socks and Timberland-branded apparel, but at its core, this is a boot company.
Timberland is all about the brand. Timberland has a reputation for producing rugged, high-quality products (Motley Fool Hidden Gems advisor Seth Jayson has had the same pair of Timberland hiking boots for more than 20 years). The brand is also known for environmental friendliness and social responsibility, which has proven a selling point with many of Timberland's outdoorsy customers. The company continues to build this brand, recently planting its millionth tree, in China, and designing a completely compostable boot.
Who they are
At Timberland's helm is third-generation CEO Jeffrey Swartz. Jeffrey's father, Sidney Swartz, continues to sit as chairman of the board, and his grandfather first started manufacturing boots under the Timberland name back in the late '70s. Third-generation CEOs are a rare breed. But family businesses have in the past attracted the attention of investing great Warren Buffett, who has invested in a number of them, the most well-known of which is the Blumkin family's Nebraska Furniture Mart.
What to watch out for
An investment in Timberland is an investment in the Timberland brand, and that brand has a new and unexpected twist to it. The past decade has seen a growing presence of Timberland boots and apparel in urban fashion. This has not been part of any company plan -- management hasn't even acknowledged it -- but there may be cause for concern if Timberland's core customer group -- the outdoorsy types -- is not keen on the trend.
Historically, Timberland has been a safe investing harbor from the fashion winds, unlike competitors Deckers Outdoor (Nasdaq: DECK), which manufactures the Ugg and Teva lines, and Crocs (Nasdaq: CROX), which makes footwear by that name. If the urban fashion trend prevails, an investment in Timberland could become much more fashion-themed, with all the negative risks arising from faddishness.
Why you should care
Although the fashion winds could sting Timberland, other gusts seem to be filling its sails. Over the past three years, its specialty work boot business has been hurt by high unemployment, which disproportionately hit the workers it supplies. As unemployment in that segment improves, Timberland's sales could rebound. Also, after a decade of declining traffic, national parks saw a 4.3% jump in recreation visitors in 2009, signaling that interest in the outdoors maintains relevant.
