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True Religion Apparel, Inc. (TRLG)

Q1 2009 Earnings Call Transcript

May 5, 2009 4:30 pm ET


Laura Foster – IR, Integrated Corporate Relations

Jeff Lubell – Chairman, CEO and Chief Merchant

Pete Collins – CFO

Michael Buckley – President


Eric Beder – Brean Murray

Karen Short – FBR Capital Management

Eric Tracy – BB&T Capital Markets

Todd Slater – Lazard Capital Markets

Ronald Bookbinder – Global Hunter Securities

Christine Chen – Needham & Co.



Good afternoon ladies and gentlemen, thank you for standing by. Welcome to the True Religion Apparel, Incorporated First Quarter 2009 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) As a reminder, this conference call is being recorded today, Tuesday, May 5th, 2009.

I would now like to turn the conference over to our host, Ms. Laura Foster of Integrated Corporate Relations. Please go ahead, ma’am.

Laura Foster

Good afternoon, everyone and thank you for joining us today to discuss True Religion Apparel’s first quarter 2009 financial results. On the call today are Jeff Lubell, True Religion’s Chairman, Chief Executive Officer, and Chief Merchant; Michael Buckley, the company’s President; and Pete Collins, the company’s Chief Financial Officer.

By now, everyone should have access to the first quarter 2009 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 2008 10-K, the upcoming Q1 2009 10-Q 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?

Jeff Lubell

Thank you, Laura, and good afternoon everyone. Thank you for joining us today as we discuss our first quarter 2009 results. We greatly appreciate your continued interest in the True Religion brand. We’re pleased with our solid start in 2009, which marks a continuation of the positive brand momentum we experienced in 2008.

Net sales for the first quarter increased 19.1% to $63.6 million from $53.4 million in the first quarter of 2008. Gross margin for the quarter expanded 380 basis points to 60.9% from 57.1% in the prior year period. Operating income increased 15% to $13.1 million from $11.4 million in the first quarter of 2008. And net income grew 9.8% year-over-year to $7.6 million or $0.32 per share from $6.9 million or $0.29 per share in the prior year quarter.

We increased our cash balance in the first quarter by $19.3 million to $76.5 million and we continued to hold no debt. Importantly, we remain optimistic about the remainder of 2009, despite the challenging retail environment. We are reiterating our 2009 guidance of net sales of $290 million to $297 million and earnings per share of $1.73 to $1.81.

Pete will elaborate on our first quarter financial performance in a moment. Michael will then provide an update on our operating performance by segments, before we open up the call to take your questions.

Despite the challenged economic and retail environment, we remain true to our strategy of delivering a constant flow of new and innovative jeans, sportswear and licensed product, reaching more consumers to our branded retail stores and wholesale partners, expanding the presence of the True Religion brand worldwide.

As you’ve heard me say in the past, it’s all about the product. And at the core of our performance is our ability to deliver high quality, well fitting, trendsetting jeans, sportswear and licensed product that resonates well with consumers.

During the first quarter, we showcased our 2009 summer and fall collections at the Project Show in Las Vegas and ENK Coterie Show in New York City. The response was overwhelmingly positive. We look forward to making our expanded product assortment more accessible to consumers through our wholesale retail partners including major department stores and specialty boutiques, as well as to our home branded retail stores.

Consistent with this goal, we continue with the expansion of our consumer direct segment growing our total store count to 49 stores at March 31, 2009 and to 51 stores as of today. The expansion of our consumer direct segment is a key component of our growth strategy. Our own stores allow us to connect with consumers directly in an environment that highlights the essence of the True Religion brand.

In addition, in our stores, we can maintain our full price integrity by offering consumers a full range of jeans, sportswear and licensed product that is not replicated elsewhere. Of course, we are mindful of the challenged economy, but we will not let it deter us from our strategy, we have a powerful brand and we are committed to supporting the growth of our brand with our own retail stores and our wholesale partners.

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