True Religion Apparel, Inc (TRLG)
Q2 2010 Earnings Call
August 3, 2010 4:30 pm ET
Anne Rakunas - ICR
Jeff Lubell - Chairman, CEO & Chief Merchant
Pete Collins - CFO
Mike Egeck - President
Lynne Koplin - COO
Eric Beder - Brean Murray
Diana Katz - Lazard Capital Markets
Christine Chen - Needham & Company
Eric Tracy - FBR Capital Markets
Dorothy Lakner - Caris & Company
Previous Statements by TRLG
» True Religion Apparel Q1 2010 Earnings Call Transcript
» True Religion Apparel Q3 2009 Earnings Call Transcript
» True Religion Apparel, Inc. Q2 2009 Earnings Call Transcript
It is now my pleasure to introduce your host, Anne Rakunas, of ICR. Thank you, Ms. Rakunas, you may begin.
Thank you. Good afternoon everyone and thank you for joining us today to discuss True Religion Apparel's second quarter 2010 financial results. By now everyone should have access to the 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 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 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 2009 10-K, the upcoming 2010 second quarter 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 please to turn the call over to True Religion's Chairman, Chief Executive Officer and Chief Merchant, Jeff Lubell. Jeff?
Thank you, Anne and good afternoon everyone. Thank you again for joining us today as we discuss our financial results for the second quarter of 2010. On the call with me today are Mike Egeck, our new President who we welcome to his first conference call with the True Religion brand, Lynne Koplin, our Chief Operation Officer and Pete Collins, our Chief Financial Officer.
Summing up the second quarter overall was a step forward for our company, our same-stores sales comparisons continue to be nicely positive in what turned out to be a relatively soft quarter for retail in general.
The net sales for our US Consumer Direct segment increased by 47%, and continued to be our largest segment representing just over half of our total sales, we opened five domestic stores in the quarter and finished with 81 stores versus 59 stores a year ago.
We also continued to make good progress in building our international business, we grew international sales by 40%, we opened full priced stores in Tokyo and London, and we recently announced our new joint venture in Europe with UNIFA premium, which has been our largest international distributor.
Our wholesale business with domestic boutiques also was a standout in the quarter, with sales increasing by more than 30%. This is the first increase in this channel in nine quarters, and is primarily result of a much more effective effort in targeting boutique accounts by our new in-house sales team.
While this is not a particularly large business for us, it is an important one for the brand and we believe we are in the early stages of ramping up this profitable channel, while our business this quarter with the major department stores is softer than our plan, we have identified the issues that we can control and are changing our approach with these customers.
In our men's business, at the majors is healthy and grew in the quarter, however our women's denim sales have slowed in this channel. We have good success with non-denim styles but we are not able to offset the current softness in denim. Our team is working on some initiatives to position us better as we move into 2011, which Lynne will speak to in a minute.
We certainly believe that a few strong brands including True Religion brand will survive the current shakeout and will be long-term beneficiaries and winners in the premium denim business.
Last month, we introduced a new licensee, Titan Industries to re-launch the True Religion Brand Jeans Footwear for women. Our first collection with Titan is expected to be in stores in spring for 2011. Our other footwear licenses remained on Board. Now, they will focus exclusively on the Men's Footwear category, where they have established a solid niche with good distribution. I look forward to partnering with Titan to develop the Woman's Footwear category.
Overall, our current order book is up slightly from the prior year with our International segment especially channel continuing their positive momentum, but the Q3 orders from the majors are down as sales in much of this channel are challenging the best.
Our total adjusted operating income for the second quarter reflects continued growth for our Consumer Direct businesses, where we saw sales growth and operating margin expansion, offset by investments in our International segment and then expected decline in our US wholesale business, both of which experienced margin contractions.