Boot Camp

Timberland's marketing staff was thinking upscale, the salespeople were pushing a lower-priced line, and the future of one of America's most promising growth companies hung in the balance

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THIS SUMMER, THE TIMBERLAND Co. made its initial public offering, a rousing success that raised more than $46 million for the company. That a U.S. shoe company could soar above the ruins of its industry and generate enthusiasm on Wall Street was unusual enough; for Timberland, it came after three tortuous years during which the company's management was virtually at civil war.

Like an inexperienced playwright, Timberland had been in turmoil over how to write its second act. The first act had been a winner: the company had forged a strong public image as a maker of premium footwear, especially of rugged boots and handsewn shoes. But with the rate of sales growth slowing, the company had divided into two warring camps. The marketing department wanted to move into even more expensive shoes; the sales department wanted to design a special line of lower-priced shoes and boots and move closer to the middle of the market.

Tempers were flaring. "Marketing's idea was to turn [our boots] into an exclusive, snob-type product," says angry former vice-president of sales Richard Croft. "Eventually, we'd sell only to people going on safari who would pay $500 for a pair for boots. But how many of those customers are there?"

Herman and Sidney Swartz, brothers who each owned half the company, couldn't resolve the hostilities. That's because they had hostilities of their own: Herman wanted to sell the company, and Sidney wanted to keep it. Trouble was, Sidney couldn't afford to buy out Herman.

With two conflicts rending the company, attire for directors' meetings was riot gear, U.S. Army issue. "A boardroom meeting," says Sidney, "was like [being in] Beirut."

Beirut is, perhaps, a metaphor for the entire U.S. shoe industry. Employment in the industry dropped to 92,500 in 1986, from 164,200 a decade earlier. Seventy factories closed last year alone, when foreign competitors' share of the U.S. market climbed to more than 81%.

Timberland prospered in this harsh environment because Herman and Sidney made a very smart move in the mid-1970s. They went upscale. Under their father, Nathan Swartz, who bought what was then the Abington Shoe Co. in 1955, the company sold private-label footwear to discount and army-navy stores, struggling mightily to clear a dime on its $4.95 boots. Herman and Sidney, who inherited the company in 1968, completely redefined the business. They moved into the upscale end of the market, selling a rugged outdoor look based on high quality (see "Sole Success," INC., February 1982). A handful of other companies -- among them Nike Inc., The Rockport Co., and Reebok International Ltd. -- caught the fashion wave in casual and exercise shoes and prospered, too.

Bucking the trend to go overseas, Timberland makes almost all of its shoes in Tennessee and Puerto Rico. Sidney Swartz believes that he could not ensure quality if he had his footwear made abroad by contract manufacturers. "We have a hard enough time in our own factories," says Swartz. "I refuse to believe that somebody in a factory 5,000 miles away is as concerned about quality as I would be. Eventually, it's going to come back and bite you in the ass."

That concern for quality has made Timberland increasingly selective about its retailers. It has been concentrating its sales in only the finest stores in each market. Several large chains of shoe stores have offered large increases in sales, but Timberland has often decided that the integrity of the brand is worth more.

Because Timberland insists on making its own shoes, it cannot introduce products as fast as companies that rely on licensing. But that suits the company. "The thing you have to be careful of is not this year's profitability, but whether the brand will exist in three years," says Jeffrey Swartz, 27, vice-president for international sales, and Sidney's son. "We're building the critical mass. It takes longer, but the only way that you can be sure that it's your vision out there is to control it."

Timberland, though, began losing that control in the early '80s, as complacency set in. "We started to relax," admits president and chief executive officer Sidney Swartz, now 51. "We thought that we were the hottest shoe brand in the world."

The company's somnolence was most evident in product development. From 1983 to 1985, it introduced some new models, but, according to Sidney Swartz, product innovation lost the intensity it had had when the company was just beginning to develop its image.

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