True Religion Apparel, Inc. (Nasdaq: TRLG) today announced financial results for the quarter ended September 30, 2012.
Third Quarter 2012 Financial Results
- Total net sales increased 9.4% to $118.5 million.
- Net sales for the Company’s U.S. Consumer Direct segment, which includes the Company’s retail stores and E-commerce business, increased 5.7% to $65.3 million and accounted for 55.1% of the Company’s total net sales for the quarter. Third quarter same-store sales for the 101 stores open at least 12 full months and E-commerce decreased 4.7%. The Company opened three stores, ending the third quarter with 119 retail stores in the United States, compared to 105 as of September 30, 2011.
- Net sales for the Company’s U.S. Wholesale segment totaled $29.8 million, a 35.4% increase as compared to the prior year quarter. This is the third consecutive year-over-year quarterly sales increase for this segment. The increase in this segment’s sales was due to increased sales to the Off-Price and Specialty Store channels.
- Net sales for the International segment totaled $22.7 million, a 3.0% decrease as compared to the prior year quarter due primarily to a slowdown in wholesale sales in Korea and Germany. Partially offsetting this decrease was a 115% increase in international retail sales as a result of an increase in store count from 13 as of September 30, 2011 to 28 as of September 30, 2012. The Company opened five international stores in the third quarter of 2012.
- Gross profit increased 6.9% to $75.0 million. The gross margin rate decreased 150 basis points to 63.3%, due primarily to an increased sales mix of discounted merchandise.
- Selling, general and administrative (“SG&A”) expenses increased 11.7% to $56.2 million. The majority of the growth in the SG&A expenses was driven by the costs associated with operating 14 additional U.S. stores and 15 additional international stores in 2012 as compared to the same period in 2011. As a percentage of net sales, SG&A expenses were 47.4% in the third quarter of 2012. The third quarter 2011 SG&A expense as a percentage of net sales was 46.4%.
- Operating income was $18.9 million or 15.9% of net sales in the third quarter of 2012. In the third quarter of 2011, operating income was $19.9 million. The decline in operating income is primarily attributable to the decrease in international wholesale sales.
- The effective income tax rate for the third quarter of 2012 was 35.9% as compared to 37.5% in the third quarter of 2011.
- Net income attributable to True Religion Apparel, Inc. for the third quarter of 2012 was $12.3 million, or $0.49 per diluted share based on weighted average shares outstanding of 25.3 million for the third quarter of 2012. For the third quarter of 2011, net income attributable to True Religion Apparel, Inc. was $12.1 million or $0.48 per diluted share based on weighted average shares outstanding of 25.0 million.
- SG&A expenses for the third quarter of 2011 included $1.2 million in net separation costs associated with the resignation of a former executive. Excluding the 2011 net separation costs, the 2011 SG&A expenses were $49.0 million, or 45.2% of the 2011 net sales; the 2011 operating income was $21.2 million, or 19.5% of the 2011 net sales; the 2011 net income attributable to True Religion Apparel, Inc. was $12.9 million; and the 2011 diluted earnings per share was $0.51.
Jeffrey Lubell, Chairman, Chief Executive Officer and Chief Merchant of True Religion Apparel, Inc., stated, “We are pleased with the results we achieved in the third quarter and we continue to see the benefit of sales growth in the U.S. Wholesale segment and our continued retail expansion in the U.S. and international markets. While our same-store sales fell short of our expectations, we were able to exit the quarter with less slow-moving merchandise. This puts us in a strong position heading into the holiday season.”