True Religion Apparel, Inc. announced financial results for the three and nine months ended September 30, 2010.
Third Quarter 2010 Financial Results
• Total net sales increased 12.5% to $92.8 million. • Net sales for the Company's U.S. Consumer Direct segment, which includes the Company's branded retail stores and e-commerce site, increased 42.0% to $46.3 million and accounted for 49.9% of the Company's total net sales for the quarter. Third quarter same-store sales for the 63 stores open at least 12 months increased 9.0%. The Company operated 89 branded stores as of September 30, 2010, compared to 66 as of September 30, 2009. • Net sales for the Company's U.S. Wholesale segment totaled $26.9 million, a 15.6% decrease as compared to the prior year period. This segment's sales have been impacted by the overall slowdown in sales of women's premium denim in the major department store channel. Consistent with the Company's strategy to maintain its premium position, sales to the off-price channel were also decreased in the quarter. The specialty channel increased sales for the second consecutive quarter as the Company's product continued to resonate with the denim tastemakers that shop in this channel. • Net sales for the Company's International segment increased 8.7% to $18.0 million. Growth in the International segment was muted by the Company's decision to terminate some non-exclusive distributors in preparation to take a more direct role in positioning its brand in international markets. • Net sales included $1.5 million of licensing revenue as compared to $1.3 million in the same period last year. • Gross profit was 62.1% of net sales as compared to 64.7% of net sales, in the third quarter of 2009. The decrease in gross margin was the result of the sell-through of higher cost merchandise acquired by the Company's new German joint venture when it started operations, increased sales from the Company's outlet stores and lower initial markup on women's jeans in response to competitor and market pricing. • Selling, general and administrative ("SG&A") expense, as a percentage of net sales, increased to 42.2% from 37.1% 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 23 additional stores in the U.S. in the third quarter of 2010 as compared to the same period in 2009. In addition, International SG&A expenses increased as the Company added wholesale sales teams in Europe and Asia and opened three branded retail stores in the past year. • Operating income as a percentage of net sales was 19.8% of net sales in third quarter 2010 versus 27.6% in third quarter 2009. Operating margins were primarily impacted by the U.S. Wholesale sales decrease, the gross margin decrease and further investments in international businesses. • The effective tax rate for the quarter was 36.1% as compared to 38.2% in the third quarterof 2009.
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