True Religion Q3 net sales up 16.8% to $108.4 million
True Religion Apparel Inc announced financial results for the quarter ended September 30, 2011.
Third Quarter 2011 Financial Results
• Total net sales increased 16.8% to $108.4 million.
• Net sales for the Company's U.S. Consumer Direct segment, which includes the Company's branded retail stores and e-commerce business, increased 33.5% to $61.8 million and accounted for 57.0% of the Company's total net sales for the quarter. Third quarter same-store sales for the 84 stores open at least 12 full months and e-commerce increased 10.2%. The Company operated a total of 105 branded stores in the United States as of September 30, 2011, compared to 89 as of September 30, 2010.
• Net sales for the Company's U.S. Wholesale segment totaled $22.0 million, an 18.3% decrease as compared to the prior year. This segment's sales continue to be impacted by our challenging sales trend for women's denim in the major department store channel. In addition, net sales decreased in part due to a customer's bankruptcy filing in the second quarter of 2011 and, consistent with the Company's 2011 plan, sales to off-price customers were reduced to support long-term brand value. Sales to the specialty store channel increased for the sixth consecutive quarter.
• Net sales for the Company's International segment increased 30.2% to $23.5 million. Growth in this segment was driven by the opening of branded retail stores since September 30, 2010: three in Canada, two each in Germany and the U.K., and one in the Netherlands. In addition, wholesale sales in Germany and the U.K. increased this quarter over last year as the Company has moved to a direct wholesale sales model in these markets.
• Gross profit increased 21.9% to $70.2 million, driven primarily by the overall sales growth. The gross margin rate increased 270 basis points to 64.8%, reflecting the ongoing sales mix shifts towards the higher-margin U.S. Consumer Direct segment and International wholesale and retail businesses.
• Selling, general and administrative ("SG&A") expenses increased 28.3% to $50.3 million from $39.2 million in the prior year quarter, and as a percentage of net sales, increased to 46.4% from 42.2% in the same quarter a year ago. The majority of the growth in the SG&A expenses was driven by the costs associated with operating 16 additional stores in the U.S. in 2011 as compared to the same period in 2010.
Also contributing to this increase is the International segment's addition of eight new retail stores; the expansion over the past year of wholesale sales teams in Germany, the U.K. and Italy; and the establishment of our regional office in Switzerland.
Also, in the third quarter of 2011, the Core Services segment incurred net separation costs associated with the resignation of a former executive of $1.2 million, or 120 basis points of the 2011 SG&A rate. Excluding the net separation costs, the SG&A rate would have been 45.2% of net sales for the third quarter of 2011. The adjusted SG&A rate increased primarily due to our planned international expansion.