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True Religion Apparel, Inc. (TRLG)

Q2 2009 Earnings Call

August 4, 2009 4:30 pm ET

Executives

Laura Foster – ICR, Inc.

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

Michael F. Buckley – President

Peter F. Collins – Chief Financial Officer

Analysts

Eric Beder – Brean Murray, Carret & Co.

Analyst for Todd Slater – Lazard Capital Markets

Ron Bookbinder – Global Hunter Securities

Jeff Mintz – Wedbush Morgan Securities

Christine Chen – Needham & Co.

Dorothy Lakner – Caris & Company

Presentation

Operator

Welcome to the True Religion Apparel, Inc. 2009 second quarter 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 is being recorded today, Tuesday August 4, 2009. I would now like to turn the conference over to our host Laura Foster of ICR.

Laura Foster

Thank you for joining us today to discuss True Religion Apparel’s second 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; Pete Collins, the company’s Chief Financial Officer.

By now everyone should have access to the second 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 www.TrueReligionBrandJeans.com by clicking on the investor relations tab. This call is being webcast and the replay will be available and archived on the company’s website.

Please note that all of 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 10K, the upcoming Q2 2009 10Q and other reports that we file periodically with the SEC. These documents contain a discussion of the risks facing our business including the 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.

Jeffrey Lubell

Thank you for joining us today as we discuss our second quarter and first half 2009 financial results. We are very pleased with our second quarter results which we believe reflect the strength of our brand and our ability to drive results in a challenging consumer environment. Net sales for the second quarter increased 12.4% to $72.1 million from $64.2 million in the second quarter of 2008. Operating income increased 16.5% to $17.9 million from $15.4 million in the second quarter of 2008 and net income grew 18.4% year-over-year to $11 million or $0.45 per share from $9.3 million or $0.39 per share in the prior year second quarter.

We also continued to strengthen our financial position. We ended the quarter with $78.8 million in cash and cash equivalents, a $5 million sequential increase and a $35.7 million increase versus last year and we continue to have no debt. Our solid financial position and profitable business model allows us to invest in our strategic growth opportunities. We believe that this represents a unique advantage as many companies in the apparel and retail space do not have the same flexibility.

For the first six months of 2009 we have sales of $135.7 million and net income of $18.6 million. This translates to year-over-year sales growth of 15.4% and a 14.7% increase in net income. We are pleased to report that this positive momentum has continued in to the back half of the year as measured by our third quarter forward order book. At June 30, 2009 our third quarter order book for both our US and international businesses was up 1% versus June 30, 2008.

We are on pace to open 27 stores in 2009 versus our prior target of 25 stores which will bring our total store count to 69 by the end of the year. Based on our year-to-date results and our improved visibility in to the third quarter of 2009, we are updating our 2009 sales and earnings guidance. We now expect net sales in the range of $293 million to $300 million and earnings per share of $1.76 to $1.84.

Pete will provide additional financial details for the second quarter and our 2009 guidance in his comments in a few moments. Michael will then provide an update on our operating performance by segment before we open up the call to take your questions. We believe that our solid financial performance demonstrates our ongoing efforts to maintain brand leadership and operational performance in the second quarter. We continue to position our company for long term growth while exceeding our internal financial goals.

We expanded our retail platform, improved our sales trends with the majors and increased our worldwide penetration. This broad based approach of growth marks a continuation of our operation strategy and is enabling us to mitigate the broader economic challenges. All of this depends upon our ability to present innovative trend setting merchandise. You have heard me say it before, it’s all about the products.

Key to our brand building efforts is reaching more consumers through the expansion of our owned retail stores. In the second quarter we opened 10 new stores, bringing our total store count at June 30th to 59 stores. We have also signed two more leases for 2009 so we’re on pace for a total of 69 retail stores by year end. Given our retail stores strong economics and brand building benefits, we are committed to expanding this segment. Importantly, we are gaining access to locations that have not been previously available at very attractive rents.

We continue to compliment the expansion of our retail platform with initiatives that are intended to build sales growth among our wholesale retail partners including major department stores and specialty store boutiques. Coordinating between True Religion and our premium wholesale partners is critical to supporting the growth of our brand. As such, we are committed to working closely alongside our wholesale partners to deliver operational excellence across our sales and marketing, forecasting, production, allocation and distribution discipline.

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