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True Religion Apparel, Inc. (TRLG)

Q4 2008 Earnings Call

February 25, 2009 4:30 pm ET


Laura Foster - ICR, Inc.

Jeffrey Lubell - Chairman of the Board, Chief Executive Officer & Chief Merchant

Michael F. Buckely - President

Peter F. Collins - Chief Financial Officer


Karen Short - FBR Capital Markets

Todd Slater - Lazard Capital Markets

Jeff Mintz - Wedbush Morgan Securities Inc.

Christine Chen - Needham & Company, LLC

Eric Tracy - BB&T Capital Markets

Jody Kane - Sidoti & Company, Inc.

Ronald Bookbinder - Global Hunter

Mimi Barteau - Chelsea Advisory Group



Good afternoon ladies and gentlemen, thank you for standing by.Welcome to True Religion Apparel, Inc. 2008 fourth quarter and fiscal year conference call. During today’s presentation all parties will be in a listen only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference call is being recorded today, Thursday, November 6, 2008. I would now like to turn the conference over to Laura Foster of Integrated Corporate Relations.

Laura Foster

Good afternoon everyone and thank you for joining us today to discuss True Religion Apparel’s fourth quarter and fiscal 2008 financial results. On the call today are Jeff Lubell, True Religion’s Chairman and Chief Executive Officer, Michael Buckley, the company’s President and Peter Collins, the company’s Chief Financial Officer.

By now everyone should have access to the fourth quarter and fiscal 2008 earnings release which went out today at approximately 4 pm Eastern time. If you have not received the release, it is available on the investor relations portion of True Religion’s website at by clicking on the investor relations tab.

This call is being webcast and a replay will be available and archived on the company’s website. Please note that all the information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call True Religion management will be providing financial guidance and making other forward-looking statements regarding expected future financial results and business opportunities.

The Company’s actual future results may be very different from our current expectations. We encourage you to read the 10Qs, 10Ks and other reports that we file periodically with the SEC. These documents contain a discussion of the risks facing our business including factors that could cause these forward-looking statements to not come true. The Company does not currently intend to update these forward-looking statements except as required by law.

With that said, it is my pleasure to turn the call over to Jeff Lubell. Jeff?

Jeffrey Lubell

Thank you Laura and good afternoon everyone and thank you again for joining us as we discuss our fourth quarter and full year 2008 results. We are great and we appreciate your continued interest in True Religion. We are pleased with our fourth quarter results which marks a solid finish of 2008. We delivered our fifth consecutive quarter of net sales and earnings growth ahead of our expectations. We view this as strong accomplishment particularly in light of the economic and consumer environment. Throughout 2008, we stay true to our business plan and continue to execute against our long term growth strategy.

The results of our conviction or reflect in our positive fourth quarter and full year 2008 results. For the fourth quarter we grew net sales 38% to $73.0 million from $52.7 million with each of our business segments posting solid sales gains. We attribute our performance for our ability to deliver high quality, unique, innovative and fresh products to the marketplace supported by our multi channeled distribution model.

Sales within our US whole sale business increased 14% led by continued market share gains with majors. These grew was partially offset by continued weakness in boutiques as many of this small and retailers are more susceptible to the downturn in the economy due to sales and inventory growth being closely related to credit. International net sales increased 27% in the fourth quarter as our jeans and related jeans sportswear product continued to resonate well with our international customer and consumers.

Sales within our own consumer direct segments increased 112% in the fourth quarter led by the expansion of our branded retail store base of 14 stores at December 31, 2008 compared to 15 at the end of the fourth quarter of 2007. This performance validates our belief that consumer are willing to pay full price for merchandise that is innovative and well fitting. We believe our fourth quarter results from particularly note where the enlighten of the growth deliver in the comparable 2007 quarter in which net sales increased 72% over the same period in 2006.

Turning to our full year result, the company delivered against this financial and operational objectives for its full year we delivered year over year net of sales growth of 56% to $270 million from a $173.3 million and we grew net income in excess of 59% to $44.4 million or $1.83 for diluted share from $27.8 million or $1.16 per diluted share in the prior year.

From a balance sheet perspective our financial position has never been stronger. We ended the year with $57.2 million in cash and no debt. In 2008, we generated $49.1 million in operating cash flow. As with the fourth quarter, all of our segments delivered strong net sales gains in 2008 as compared to 2007. U.S. hold sale increase 37% in 2008 with majors posting 58% sales book year-over-year net. Net sales to majors were driven by an increased penetration of the True Religion Brand and continued market share gains.

Throughout 2008, we continue to be a top selling brand among our key wholesales customers as consumers sold our premium denim that was not only of the highest quality but also as fresh and compelling. It is our belief that retailers recognized our demand for innovation and continue to outfit more dollars for True Religion. Product is a part of our brand and we are committed to not only introduce new product to the market place but also to evolve in a way that resonates well with a sense of new news to customers.

On the international front, net sales increased to 26% over 2007. The net sales increase were partially offset by a decrease in sale expense. In 2008, we established our own subsidiary responsible for managing our Japanese wholesale and retail businesses. Our international momentum expanded throughout the year and our product offering a lot of to cut through price resistance caused by the strengthening of the U.S. dollar in the second half of 2008.

As we mentioned at the beginning of the year, we anticipate that our customer direct segment will deliver exceptional sales performance and we delivered a net sales increase of 157% over 2007. Turning to our guidance, before Pete and Michael share their comments on our business plan for 2009, let me offer my high level perspective. As many of you are acutely aware, we are offering unchartered-territories and our market place is experiencing rapid changes. While True Religion is certainly not immune to this events, we remain acutely attuned to the changes in the macro environment with a focus on monitoring key trends such as sales backlog, inventory levels and variables spending.

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