For Timberland, the Great Outdoors Is Overseas : Manufacturing: The maker of hiking boots and other gear cites competition and the quest for improved profitability as motives for the move.

Timberland, the all-American maker of hiking boots and outer wear, is adopting what has become a widely used Yankee business practice: By the end of the year, none of its products will be made in any of the 50 states.

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Competition, consolidation and the quest for higher profits have compelled Timberland to shift manufacturing to Asia, Europe and the Caribbean, said Roger Rydell, vice president of corporate communications.

“We’re not saying we are not good manufacturers. We are, but manufacturing is a global commodity,” Rydell said in an interview at company headquarters recently.

The move comes at the expense of jobs in Tennessee and North Carolina. Rydell said the company resisted relocation as long as possible. “If you look at the history of the industry, we’re late in the curve,” he said.

Timberland contracted out 5% of its work five years ago, 30% last year and will have contracted out 60% by the end of this year. The remainder will be produced at Timberland plants in the Dominican Republic and Puerto Rico, Rydell said.

But the move overseas--and accompanying lower labor costs--have not dazzled Wall Street.

Analyst Laurence Leeds, managing director of Buckingham Research Group in New York, called Timberland “one of America’s great companies” but said it needs better organization.

“It’s synonymous with the rugged American outdoor concept,” he said. “They make a wonderful product that everyone wants. Their sales grow geometrically, and their profitability diminishes at an equivalent rate.”

Despite unabated sales growth since the company went public in 1987 and a 52% rise in sales from 1993 to 1994, profits fell 21% over those two years.

Rydell said profits dipped because Timberland cut prices to attract more customers and to compete with competitors such as Nike, Reebok and Adidas that also make hiking-style boots.

Steven Frankel, managing director of the Boston-based investment bank Adams Harkness & Hill, said the company should have cut costs before dropping prices.

“This is an above-average (company) with below-average profitability,” he said. “The company has never been able to earn margins commensurate with the power of the brand name.”

Rydell faulted Wall Street for not always appreciating Timberland’s long-term focus but admitted the company realized its organizational problems.

“I think history will prove that our infrastructure was unable to keep up with the needs of a business that was $637 million (last year) when the infrastructure was built to support a $250-million business,” he said.

Timberland has shifted its focus from stitching together shoes to research and development, sales, marketing and quality assurance. Rydell said he is optimistic about the future.

“Some have said the move to outdoors is sort of a fad,” he said. “Our belief is that it will not run its course and diminish but rather will be a sustainable trend.

“People will realize the more time they spend in an outdoor environment how positive an influence that can be on one’s life. Our feeling is that in 10 years, this industry will be more popular than it is today.”

Frankel agreed--and said that is exactly why Timberland needs to watch out for rivals. “The outdoor segment is very hot, but it has become much more competitive. Timberland no longer has the market to itself,” he said.