Sales up 6.8% at True Religion Apparel in Q2

Second Quarter 2012 Financial Results

• Total net sales increased 6.8% to $104.9 million.
• Net sales for the Company’s U.S. Consumer Direct segment, which includes the Company’s retail stores and e-commerce business, increased 9.4% to $64.4 million and accounted for 61.3% of the Company’s total net sales for the quarter. Second quarter same-store sales for the 96 stores open at least 12 full months and e-commerce increased 2.4%. The Company opened seven stores and relocated one store, ending the second quarter with 116 retail stores in the United States, compared to 102 as of June 30, 2011.
• Net sales for the Company’s U.S. Wholesale segment totaled $22.4 million, a 6.7% increase as compared to the prior year quarter. This is the second consecutive year-over-year quarterly sales increase for this segment. The increase in this segment’s sales is due to increased sales to the Off Price and Specialty store channels.
• Net sales for the International segment totaled $17.7 million, a 2.0% decrease as compared to the prior year quarter primarily due to a slowdown in wholesale sales in Korea and Canada. Partially offsetting this decrease is a 114% increase in our international retail sales due to an increase in store count from nine at the end of the second quarter of 2011 to 23 at the end of the second quarter of 2012. The Company opened five international stores in the second quarter of 2012.
• Gross profit increased 4.8% to $67.5 million, driven primarily by the overall sales growth. The gross margin rate decreased 120 basis points to 64.3%, primarily due to increased markdowns in our Outlet stores to sell through slower moving women’s merchandise.
• Selling, general and administrative (“SG&A”) expenses increased 3.4% to $50.9 million from $49.2 million in the prior year quarter. The majority of the growth in the SG&A expenses was driven by the costs associated with operating 14 additional U.S. stores and 14 additional international stores in 2012 as compared to the same period in 2011. As a percentage of net sales, SG&A expenses were 48.5% in the second quarter of 2012. In the second quarter of 2011, SG&A expenses included $1.5 million in litigation settlement expense and $0.7 million in a bad debt write off as a result of a former customer’s bankruptcy. The 2011 SG&A expense as a percentage of net sales was 50.1%, and excluding the litigation settlement and bad debt expenses the SG&A rate was 47.8%
• Operating income was $16.6 million or 15.9% of net sales in the second quarter of 2012. In the second quarter of 2011, operating income was $15.2 million. Excluding the litigation settlement and bad debt expenses, the operating margin in the second quarter of 2011 was 17.7%.