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True Religion Apparel (TRLG)

Q3 2009 Earnings Call

November 3, 2009 4:30 PM ET


Laura Foster – ICR, Inc.

Michael F. Buckley - President

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

Peter F. Collins - Chief Financial Officer


Eric Beder - Brean Murray, Carret & Co

Todd Slater - Lazard Capital Markets

Christina Chen - Needham & Co.

Eric Tracy - BB&T Capital Markets

Ron Bookbinder - Global Hunter Securities

Dorothy Lakner – Caris & Company



Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the True Religion Apparel Incorporation 2009 third quarter results conference call. During today’s presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator’s instructions) This conference is being recorded today, Tuesday, November 3, 2009. I would not like to turn the conference over to our host, Ms. Laura Foster, of ICR. Go ahead, ma’am.

Laura Foster

Thank you. Good afternoon everyone and thank you for joining us today to discuss True Religion Apparel’s third 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 third quarter of 2009 earnings release which went out today at approximately 4:00 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 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 maybe very different from our current expectations. We encourage you to read the 2008 10-K, the upcoming Q3 2009 10-Q and other reports that we filed 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 is not currently intend to update these forward-looking statements except as required by law.

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

Jeffrey Lubell

Thank you, Laura and good afternoon everyone. Thank you for joining us today as we discuss our third quarter and year-to-date 2009 financial results. We are pleased that our positive trend momentum continued in the third quarter. Our performance which is notable given the tough conditions for premium priced goods and tight inventory controls amount retailers reflects our ongoing efforts to extend our product assortment, diversity our distribution and grow our global presence, as well as the ongoing preference for our brand.

For the third quarter net sales increased 3.8% to $82.4 million from $79.4 million in the third quarter of 2008. Gross margin expanded 630 basis points, 64.7% from 58.4% in the prior year quarter. Operating income increased 1.9% to $22.7 million from $22.3 million in the third quarter of 2008. And net income was $14.1 million or $0.58 per share compared to $15.4 million or $0.64 per share in the prior year third quarter.

The year-over-year EPS comparison is impacted by the tax benefits of $0.09 per diluted share that were reported in the third quarter of 2008.

In the first nine months of 2009 we have significantly strengthened our balance sheet, finishing the third quarter with $88.7 million in cash and cash equivalents, a $35.7 million increase versus last year. And we continue to hold no debt.

For the first nine months of 2009 we have sales of $218.2 million in operating income of $53.7 million. This translates to year-over-year sales growth of 10.7% and a 9.5% increase in operating income.

For the full year we are updating our guidance as follows; we now expect net sales in the range of $295 million to $300 million. Earnings per share is expected to be in the range of $1.82-$1.86 as compared to our previously issued guidance of $1.66-$1.84.

Despite quarter uncertain surrounding the economic outlook for the remainder of 2009 we are confident in our ability to deliver top and bottom line results in line with these expectations. Pete will provide additional financial details for the third quarter in his comments in a few moments. Michael will then provide an update on our operating performance by segment before we open up the calls to take your questions.

We believe our performance highlights the ongoing preference for our brand as we continue to deliver quality and innovation in our core jeans wear and jeans wear related sportswear merchandise. Just as September we showcased our upcoming holiday 2009 and Spring and Summer 2010 collections at the product shows in Las Vegas and in the EAK show in New York City. They were by far our largest collections yet and the response was very positive.

A True Religion we take great pride in infusing the marketplace with newness and innovation, throughout our jeans and related sportswear apparel. We believe this commitment continues to be rewarded by consumers. In fact, according to our recent on campus research study a poll of 11,000 students across 1,000 US campuses reported quality and uniqueness among the top two factors that contributed to brand preference among these students. And topping the list for must-have back to school shopping, True Religion brand jeans.

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