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Call Start: 16:30

Call End: 17:08

True Religion Apparel Inc. (TRLG)

Q3 2010 Earnings Conference Call

November 3, 2010 4:30pm ET

Executives

Anne Rakunas – ICR

Jeff Lubell – Chairman of the Board

Mike Egeck – President

Pete Collins – Chief Financial Officer

Lynne Koplin – Chief Operation Officer

Analysts

Eric Beder – Brean Murray

Todd Slater – Lazzard Capital Markets.

Steven Gregory - Mandalay Research

Christine Chen - Needham & Company

Dorothy Lakner - Caris & Company

Presentation

Operator

Greetings and welcome to the True Religion Apparel Inc., 2010 Third Quarter Earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne Rakunas of ICR. Thank you, you may begin.

Anne Rakunas

Thank you, operator. Good afternoon everyone and thank you for joining us today to discuss True Religion Apparel 3Q 2010 Financial Results. By now, everyone should have access to the earnings release which went out today at approximately 4:00pm ET. If you did not receive the release, it is available on the investors-relations portion of True Religion's website at Truereligionbrandjeans.com by clicking on the "Investor Relations" tab.

Results are posted on the site – a detailed management commentary of our results for the third quarter in year to date. The call is being webcast and a replay will be available and archived in the company's website. Take note that all of the information discussed on the call today s covered under the Safe Harbor provision of the provision of the Private Securities Litigation 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 may be very different from our current expectation.

We encourage you to read the 2009 10-K, the upcoming 2010 3Q 10-Q, and other reports that we follow 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, it is my pleasure to turn the call over to True Religion Apparel chairman, chief executive officer, and chief merchant, Jeff Lubell.

Jeff Lubell

Thank you, Anne, and good afternoon everyone. Thank you for joining us today as we discuss our financial results for the third quarter of 2010. Speaking on the call with me today are Mike Egeck our President, and Pete Collins our Chief Financial Officer, Lynn Koplin our Chief Operation Officer who also participates during the question and answer portion of today's call.

The third quarter included some challenges for us as we experienced a mixed performance among our business segments. Overall, we did not accomplish the financial results we had expected in the quarter, but we continue to execute our plan and feel good about the initiatives we are working on.

The stand out performer in the third quarter was, again, our consumer direct segment where we achieved sales growth of 42% including same-store sales increase of 9%. International-segment sales were up 9% despite our decision to terminate certain non-exclusive distributors in preparation for taking some key markets direct. The wholesale business in certain international markets was soft, however, our newly-opened stores in Tokyo, London, and Cologne were well received. We look forward to continued expansion of our retail model in International markets.

The domestic wholesale business was a challenge in the third quarter overall. The segment's net sales decreased and our women's business with the major department stores was particularly soft. Mike will discuss later our plan to improve this business.

While we are reducing our outlook for 2010 – which Pete will discuss in a minute – we continue to focus on using our success in the U.S. consumer-direct segment to elevate our business across all channels and regions. I'm very with contributions made by our key new hires in 2010. Our bench has more skill, and we have more teamwork than in the past.

With that, I would like to turn the call over to Pete to review the key financial highlight from the quarter. Pete.

Pete Collins

Thanks, Jeff. Good afternoon, everyone. I’ll review highlights and also discuss our updated guidance for the year.

As noted in the press release, additional details on the quarter's financial results can be found in our financial review document posted on our IR website under "Management's Quarterly Commentary on 3Q 2010 Results."

This is a new practice for us, and we intend to continue it going forward by posting on our corporate website a similar report each day we post our earnings release.

Our third quarter net sales increase 12.5% to $92.8 million, and our consumer-direct segment continue to drive our top-line growth. Same-store sales, which included sixty-three, they were up for at least twelve months, increased 9.0%. Overall net sales in the consumer-direct segment increased by 42%. This continues to be our largest segment at about 50% of our total net sales.

We opened eight domestic stores in the quarter and finished with eighty-nine domestic stores versus sixty-six stores a year ago.

(Year’s) wholesale sales for the quarter declined by 15.6% to $26.9 million. Our specialty channel achieved increased net sales for the second consecutive quarter. The sales to the major department stores decreased more than we anticipated.

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