True Religion Apparel Q1 profit rises

12 May '09

4 min read

True Religion Apparel Inc announced financial results for the first quarter ended March 31, 2009.

First Quarter 2009 Financial Results:
• Total net sales were $63.6 million, an increase of 19.1% from $53.4 million in the first quarter of 2008.
- Net sales for the Company's U.S. wholesale segment decreased 11.0% to $28.9 million from $32.5 million in the prior year period.
- Net sales for the Company's consumer direct segment, which includes the Company's branded retail stores and e-commerce site, increased 95.8% to $23.1 million from $11.8 million in the prior year period. The Company operated 49 branded stores as of March 31, 2009, compared to 18 as of March 31, 2008.
- Net sales for the Company's international segment increased 26.0% to $11.2 million from $8.9 million in the prior year period.
- First quarter 2009 net sales included $0.4 million of licensing revenue.
• Gross profit was $38.7 million, or 60.9% of net sales, compared to $30.5 million, or 57.1% of net sales, in the first quarter of 2008. The overall improvement in gross margin was due to the ongoing segment mix shift toward the Company's higher-margin consumer direct business.
• Selling, general and administrative (“SG&A”) expense increased 34.1% to $25.7 million from $19.1 million in the prior year period, and as a percentage of sales, increased 450 basis points to 40.3% from 35.8% in the same period a year ago. The year-over-year growth in SG&A expenses was driven by the increased investment in infrastructure to support the Company's growth plans, including the expansion of its consumer direct and international businesses. The increase in SG&A expenses was partially offset by a decrease in share-based compensation expense.
• Operating income increased 15.0% to $13.1 million, or 20.5% of net sales, from $11.4 million, or 21.2% of net sales, in the 2008 first quarter. The year-over-year reduction in operating margin was primarily driven by the decrease in the Company's consumer direct operating margin.
• The effective tax rate for the quarter was 41.7%. In the first quarter 2009, the Company revised its state income tax apportionment factors for 2004 through 2008, the cumulative impact of which resulted in approximately $540,000 in incremental taxes that were recorded in the quarter. The Company expects an effective tax rate of 37.7% for the remaining quarters in 2009 with an effective tax rate of 38.5% for the full year of 2009.
• Net income increased 9.8% to $7.6 million, or $0.32 per diluted share based on weighted average shares outstanding of 24.0 million, from $6.9 million, or $0.29 per diluted share based on weighted average shares outstanding of 24.1 million, in the 2008 first quarter.

Management Comments
“We are pleased with our start to 2009, which marks a continuation of the positive brand momentum experienced in 2008,” said Jeffrey Lubell, Chairman, Chief Executive Officer and ChiefMerchant of True Religion Apparel, Inc. “Despite the challenging economic environment, we remained committed to our strategy of continually delivering innovative jeans, sportswear and licensed products, reaching more consumers through our branded retail stores and wholesale partners, and building awareness of the True Religion brand world-wide. Our integrated approach to growth enabled us to increase first quarter revenues by 19% and net income by 10% over the prior year period.”

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