May 5 - Timberland Co said it expects margins to remain under pressure this year as the shoemaker battles rising product and labor costs, sending its shares plunging 32 percent.

Timberland boots

The company, known for its rugged outdoor footwear brands such as Earthkeepers, Howies and Mountain Athletics brands, also posted a quarterly profit that missed Wall Street expectations for the first time in seven quarters.

Timberland has consistently warned of margin pressures from rising leather, labor and transportation costs this year.

The Stratham, New Hampshire-based company said it delayed meaningful price increases to deal with the higher costs to the second half of 2011.

The company also said it would invest in marketing to drive sales growth over the second half of the year.

"(Timberland's) miss was pretty shocking. They surprised the market in terms of how much they are spending on investments," Wall Street Strategies analyst Brian Sozzi told Reuters.

"One area of investment is China and the other is technology to support their store growth initiatives."

The results are in contrast to the better-than-expected earnings of rivals Wolverine Worldwide Inc and Deckers Outdoor.

Skechers USA Inc, however, posted a smaller-than-expected first-quarter profit on declining demand for the once-hot toning shoes.

For the quarter ended April 1, Timberland earned 35 cents a share, missing analysts' expectations of 59 cents a share, according to Thomson Reuters I/B/E/S.

Timberland's shares dived 32 percent to a three-month low of $28.10 on Thursday on the New York Stock Exchange. The meltdown has wiped out around $650 million of the company's market value.

(Reporting by Viraj Nair in Bangalore; Editing by Maju Samuel and Saumyadeb Chakrabarty)