True Religion Apparel Consumer Direct sales up

05 May '10

5 min read

True Religion Apparel Inc announced financial results for the quarter ended March 31, 2010.

Management Comments
"We are pleased with our start to 2010. As our largest segment, Consumer Direct, increased its sales 68.1% through opening stores and same-store sales growth. Our solid top line domestic and international growth underscores the strength of our brand and the continued success of our strategy," stated Jeffrey Lubell, Chairman, Chief Executive Officer and Chief Merchant of True Religion Apparel, Inc. "We are continuing to gain greater control over our destiny and evolve into a global lifestyle brand. Also, we are encouraged by recent trends in our U.S. Wholesale business as we transition to our direct sales team. With the continued execution on our key initiatives, we are on track to deliver another year of strong results in 2010."

First Quarter 2010 Financial Results

• Total net sales were $77.9 million, an increase of 22.4% as compared to $63.6 million in the first quarter of 2009.
o Net sales for the Company's Consumer Direct segment, which includes the Company's branded retail stores and e-commerce site, increased to $38.8 million as compared to $23.1 million in the prior year period. First quarter same-store sales for 46 stores open at least 12 months increased 18.7%. The Company operated 76 branded stores as of March 31, 2010, compared to 49 as of March 31, 2009. The Consumer Direct segment's net sales equaled 50% of the Company's total net sales.
o Net sales for the Company's U.S. Wholesale segment totaled $24.2 million, a 16.5% decrease as compared to $28.9 million in the prior year period. The Company's sales to the off-price channel decreased 26.0%, or $2.3 million, which is consistent with its 2010 business plan. Also, sales to Majors and boutiques decreased 12.4% or $2.5 million, which is slightly better than the Company's expectations.
o Net sales for the Company's International segment increased 22.8% to $13.8 million as compared to $11.2 million in the prior year period.
o Net sales included $1.2 million of licensing revenue as compared to $0.4 million in the same period last year.
• Gross profit was $50.0 million, or 64.2% of net sales, compared to $38.7 million, or 60.9% of net sales, in the first quarter of 2009. The overall improvement in gross margin was primarily due to the ongoing sales mix shift toward the Company's higher-margin Consumer Direct segment.
• Selling, general and administrative ("SG&A") expense increased 42.7% to $36.6 million as compared to $25.7 million in the prior year period. As a percentage of net sales, SG&A increased 670 basis points to 47.0% from 40.3% in the same period a year ago. The majority of the year-over-year growth in SG&A expenses was driven by the costs associated with operating 27 additional stores since March 31, 2009. In addition, SG&A expenses for the Company's U.S. Wholesale and International segments increased primarily due to additional spending to support company-wide growth plans, including the transition from a sales agent to a direct sales team for the U.S. Wholesale segment, additional advertising, and establishing international subsidiaries and sales teams.

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