People's Liberation delivers strong Q1 gross margin
People's Liberation, Inc., the designer, marketer and seller of high-end casual apparel under the brand names William Rast, People's Liberation, and in the United States, J.Lindeberg, announced financial results for the first quarter ended March 31, 2010.
Three Months Ended March 31, 2010
Net revenue for the first quarter of 2010 increased 11.0% to $8.4 million compared with net revenue of $7.5 million for the first quarter of 2009. The increase in net revenue was due to increased retail sales and sponsorship revenue received from William Rast's sponsorship agreement offset by a net decrease in wholesale sales.
“We are extremely pleased to have delivered strong revenue for the first quarter of 2010,” stated Colin Dyne, the Company's Chairman and Chief Executive Officer. “Both our J. Lindeberg and William Rast retail stores have seen increased momentum and awareness and our J. Lindeberg store located in Miami, Florida, has performed well during its first month of operation. We are continuing to execute on our key initiatives and are confident about the long-term opportunities for our business.”
Gross profit for the first quarter of 2010 increased 33.7% to $4.5 million from $3.4 million for the first quarter of 2009. Gross margin improved to 53.6% in the first quarter of 2010 from 44.5% in the first quarter of 2009. The improvement was driven by a combination of sponsorship revenue received in accordance with the William Rast sponsorship agreement which revenue was generated without any corresponding cost of revenue in the quarter, and increased retail sales of J. Lindeberg and William Rast product lines at higher gross margins. Excluding the sponsorship revenue, gross margin from product sales increased 360 basis points compared to the prior year period.
Selling, design and production expenses for the first quarter were $3.0 million, compared to $2.8 million in the prior year period. As a percentage of net revenue, selling, design and production expenses decreased to 36.2% compared to 37.1% in the prior year. The increase in selling, design and production expenses was due to the increased cost of the Company's William Rast fashion show held during Fashion Week in New York City in February 2010, offset by decreased design costs related to the Company's restructured design services agreement, which provides for a reduction in the fees paid for services and a reduction in sample costs.
General and administrative expenses for the first quarter of 2010 were $2.4 million, compared to $1.9 million in the prior year period. As a percentage of net revenue, general and administrative expenses increased to 28.4% from 25.8% in the prior year. The increase in general and administrative expenses was due primarily to increased rent and staffing for the Company's new retail stores.
Q1 and Recent Developments & Highlights
• In April, the Company opened its third J. Lindeberg branded retail store, located at the Aventura Mall in Miami, Florida. The store offers its men's collection and tailoring, as well as its J. Lindeberg signature golf line.