Shares of True Religion Apparel Inc. spiked more than 25 percent Wednesday after the company reported sales from a ballooning portfolio of branded stores and expansion in international markets helped it overcome double-digit declines in its U.S. wholesale business during the first quarter.
This story first appeared in the May 7, 2009 issue of WWD. Subscribe Today.
For the three months ended March 31, the premium denim label saw earnings improve 9.8 percent to $7.6 million, or 32 cents a diluted share, besting Wall Street’s consensus estimate of 28 cents. Comparatively, the company reported earnings of $6.9 million, or 29 cents, in the same period a year ago. Sales jumped 19.1 percent to $63.6 million from $53.4 million.
Shares ended the day at $22.27, up $4.47, or 25.1 percent, in Nasdaq trading.
Sales growth was paced by the consumer direct business, which saw volume vault 95.8 percent to $23.1 million from $11.8 million. The company opened seven stores during the quarter, bringing the total to 49 compared with 18 during the first quarter a year ago. Two more stores opened in April and management said it is on track to open an additional 16 units this year.
“Our own stores allow us to connect with consumers directly in an environment that highlights the essence of the True Religion brand,” said Jeffrey Lubell, chairman and chief executive officer, during a conference call with analysts.
With no debt and $76.5 million in cash on hand, as well as falling asking rents, management also believes it is positioned to continue the speedy pace of store openings.
The label’s international business saw sales improve 26 percent to $11.2 million from $8.9 million. The U.S. wholesale business fell 11 percent to $28.9 million from $32.5 million.
Pete Collins, chief financial officer, said jeans represent 70 percent of sales in the company’s branded stores compared with 80 percent a year ago.
Michael Buckley, president, said sales to major U.S. department stores fell 12.6 percent during the quarter.
Management expects to see midsingle-digit declines in the wholesale category throughout the year. The company reiterated its guidance for the year of sales between $290 million and $297 million. Earnings per share are expected to come in at between $1.73 and $1.81.