Changes in True Religion Apparel Inc.’s business model cut into profits even as it registered a double-digit sales gain.
For the three months ended Sept. 30, income fell 16.4 percent to $11.8 million, or 48 cents a diluted share, from $14.1 million, or 58 cents, a year ago. Total sales rose 12.5 percent to $92.8 million from $82.4 million. By category, U.S. consumer direct sales jumped 42 percent to $46.3 million, while U.S. wholesale sales fell 15.6 percent to $26.9 million. International sales were up 8.7 percent to $18 million.
Jeffrey Lubell, chairman, chief executive officer and chief merchant, noted, “U.S. consumer direct, our largest segment, performed very well, generating a 9 percent same-store sales increase, which was an acceleration from the second-quarter increase. Sales in our U.S. wholesale segment declined, driven by our strategic reduction of sales to the off-price channel and the ongoing weakness of the women’s premium denim category in the major department stores.”
He added that the company has been working with its department store accounts to “reinvigorate” the premium denim category.
Lubell said newly opened stores in Tokyo, London and Cologne, Germany, were well received, although the quarter’s international results “reflect our decision to terminate some distributors as we accelerate our plans to grow our brand in the long term.”
True Religion expects earnings for the year ending Dec. 31 to be between $1.73 and $1.78 a share on a sales range of $355 million to $360 million.
For the nine months, income fell 15.3 percent to $27.7 million, or $1.12 a diluted share, from $32.7 million, or $1.35, a year ago. Sales gained 15.9 percent to $252.8 million from $218.2 million.
Results were reported after the close of the markets Wednesday. On Thursday, shares fell $1.40, or 7 percent, to $18.73.