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International segment grows in Q4 2011 at True Religion

13
Feb '12
True Religion Apparel Inc announced financial results for the quarter and year ended December 31, 2011.

Net sales for the Company's U.S. Consumer Direct segment, which includes the Company's branded stores and e-commerce business, increased 23.7% to $77.3 million and accounted for 64.8% of the Company's total net sales for the quarter. Fourth quarter same-store sales for the 92 stores open at least 12 full months and e-commerce increased 11.1%. The Company operated a total of 109 branded stores in the United States as of December 31, 2011, compared to 94 as of December 31, 2010.

The Company's International segment's 2011 net sales remained flat with 2010 at $19.0 million, as retail sales growth in Canada and the United Kingdom was offset by the decision to discontinue sales of merchandise in the Korea off-price channel.

Net sales for the Company's U.S. Wholesale segment totaled $22.4 million, a 20.4% decrease as compared to the prior year. The decline primarily reflects the planned reduction in sales to off-price customers, which is consistent with the Company's 2011 plan to support long-term brand value. Sales to the specialty store channel, which now accounts for a majority of this segment's net sales, increased for the seventh consecutive quarter.

Gross profit increased 9.7% to $76.5 million, driven primarily by the overall sales growth. The gross margin rate increased 120 basis points to 64.1%, reflecting the ongoing sales mix shift towards the higher-margin U.S. Consumer Direct segment. The Consumer Direct segment's gross margin rate decreased 230 basis points due to higher than expected markdowns in outlet stores to respond to the highly promotional environment.

Selling, general and administrative (“SG&A”) expenses increased 19.0% to $51.9 million from $43.6 million in the prior year quarter, and as a percentage of net sales, increased to 43.4% from 39.3% in the same quarter a year ago.

Operating income totaled $24.7 million, down 5.8% from the fourth quarter of last year. Operating margin was 20.7% in the fourth quarter of 2011 versus 23.6% in the fourth quarter of 2010. The decrease in the operating margin is primarily due to the reduction in sales to U.S. and Korea off-price accounts, the higher markdowns in outlet stores and the store impairment charge increase.

Net income attributable to True Religion Apparel, Inc. decreased to $14.5 million, or $0.57 per diluted share based on weighted average shares outstanding of 25.3 million, as compared to $15.8 million, or $0.63 per diluted share based on weighted average shares outstanding of 25.1 million in 2010. Net income attributable to True Religion Apparel, Inc. included $0.7 million in foreign currency losses related to intercompany balances, or $0.4 million after tax, compared to less than $0.1 million in foreign currency gains related to intercompany balances, both before and after tax, in the fourth quarter of 2010.


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