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True Religion to raise full year 2008 guidance
08
Nov '08
True Religion Apparel Inc announced financial results for the three and nine months ended September 30, 2008. Net sales in the third quarter of 2008 were $79.4 million, an increase of 63.9% from $48.4 million in the third quarter of 2007. Net sales in the Company's U.S. wholesale segment increased 53.8% to $46.3 million from $30.1 million in the prior year period. The Company's international wholesale segment's net sales increased 3.2% to $11.2 million from $10.9 million in the 2007 prior year period.

Net sales for the consumer direct segment, which includes the Company's branded retail stores and e-commerce site, increased 198.2% to $21.5 million from $7.2 million in the prior year period. The Company operated 36 branded stores as of September 30, 2008, compared to 13 as of September 30, 2007. Third quarter 2008 net sales included $0.4 million of licensing revenues.

Gross profit in the third quarter of 2008 was $46.4 million, or 58.4% of net sales, compared to $27.7 million, or 57.2% of net sales, in the third quarter of 2007. The overall improvement in gross margin reflects the ongoing segment mix shift towards the Company's higher-margin consumer direct business, partially offset by increased sales of prior season merchandise to select off-price retailers.

Operating income for the 2008 third quarter increased 46.4% to $22.3 million, or 28.1% of net sales, from $15.2 million, or 31.4% of net sales, in the 2007 third quarter. The year-over-year reduction in operating margin was primarily driven by the decrease in the U.S. Wholesale segment's gross margin and the incremental expense in connection with the 2008 Fall National print campaign.

True Religion's effective tax rate for the third quarter of 2008 was 31.1% compared to 44.0% for the third quarter of 2007. During the third quarter, the Company implemented a tax planning strategy that retroactively changed its filing status in certain states which reduced the Company's tax provision by $1.5 million, and increased its earnings per diluted share by $0.06. Additionally, the Company finalized its 2007 tax returns, which included additional analysis of its Federal and State tax obligations; as a result of this analysis, the Company reduced its income tax provision in the third quarter of 2008 by $0.6 million, which increased its earnings per diluted share by $0.03.

Net income for the 2008 third quarter increased 75.8% to $15.4 million, or $0.64 per diluted share based on weighted average shares outstanding of 24.2 million, from $8.8 million, or $0.37 per diluted share based on weighted average shares outstanding of 24.0 million in the 2007 third quarter.

Net sales for the first nine months of 2008 were $197.0 million, an increase of 63.4% from $120.5 million in the prior year period. Net sales in the Company's U.S. wholesale segment increased 47.3% to $117.2 million from $79.6 million in the prior year period. The Company's international wholesale segment's net sales increased 24.1% to $28.0 million from $22.5 million in the first nine months of 2007.

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