Consumer Direct achieves same-store sales growth of 6.7%, True
True Religion Apparel, Inc. announced financial results for the three and six months ended June 30, 2010.
Second Quarter 2010 Financial Results
• Total net sales were $82.2 million, an increase of 14.0% as compared to $72.1 million in the second quarter of 2009.
• Net sales for the Company's U.S. Consumer Direct segment, which includes the Company's branded retail stores and e-commerce site, increased 47.2% to $41.5 million as compared to $28.2 million in the prior year period. Second quarter same-store sales for the 56 stores open at least 12 months increased 6.7%. The Company operated 81 branded stores as of June 30, 2010, compared to 59 as of June 30, 2009. The U.S. Consumer Direct segment's net sales equaled 50.5% of the Company's total net sales in the second quarter of 2010.
• Net sales for the Company's U.S. Wholesale segment totaled $25.7 million, a 16.7% decrease as compared to $30.8 million in the prior year period. The Company's sales to full-price accounts decreased 13.3%, which exceeded our plan. Net sales to Majors were below plan, but the boutiques channel achieved increased net sales for the first time in nine quarters. Also, the Company's net sales to the off-price channel decreased by $2.3 million, or 24.7% which is consistent with our 2010 business plan.
• Net sales for the Company's International segment increased 14.1% to $13.8 million as compared to $12.1 million in the prior year period.
• Net sales included $1.2 million of licensing revenue as compared to $1.0 million in the same period last year.
• Gross profit was $52.7 million, or 64.1% of net sales, compared to $44.8 million, or 62.1% of net sales, in the second quarter of 2009. The overall improvement in gross margin was primarily due to the ongoing sales mix shift toward the Company's higher-margin U.S. Consumer Direct segment.
• Selling, general and administrative ("SG&A") expense increased 51.5% to $40.7 million as compared to $26.9 million in the prior year period. As a percentage of net sales, SG&A increased to 49.5% from 37.3% 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 22 additional stores in the second quarter of 2010 as compared to the same period in 2009, as well as $4.5 million ($2.9 million net of income tax or $0.12 per diluted share) of separation costs. 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 opening the Company's first international full-price retail stores in Tokyo and London. SG&A excluding the separation costs would have been $36.2 million, or 44.0% of net sales.
• Operating income decreased 33.2% to $12.0 million as compared to $17.9 million in the prior year period. Operating income was 14.6% of net sales in Q2 2010 versus 24.9% in Q2 2009. The U.S. Consumer Direct segment's operating margin increased by 70 basis points due to greater leverage from the same-store sales increase. Operating margins were primarily impacted by costs associated with the former president's separation agreement, as well as the U. S. Wholesale sales decrease and other spending to support company-wide growth plans. Operating income excluding the separation costs would have been $16.5 million or 20.1% of net sales.