Coming off a 30.2 percent expansion of international revenues in the third quarter, True Religion Apparel Inc. set the stage for further global growth with a distribution agreement covering China.

This story first appeared in the November 2, 2011 issue of WWD. Subscribe Today.

The agreement, effective in October and running through 2016, grants China’s Envols International Trading Co. Ltd. rights as exclusive distributor for True Religion in China and imparts nonexclusive rights to the brand in Hong Kong. The association covers True Religion brand stores and shop-in-shops in other stores.

Envols has carried True Religion merchandise in multibrand stores it operates in China. The company was founded in 2003 to expand the retail and wholesale presence of Giorgio Armani and affiliated brands, such as Armani Jeans, throughout China.

Overall in the third quarter ended Sept. 30, the Vernon, Calif.-based True Religion saw net income expand 2.6 percent to $12.1 million, or 48 cents a diluted share, from $11.8 million, also 48 cents. Excluding the net effect of severance costs related to the departure of Michael Egeck as the company’s president, earnings per share came to 51 cents, 2 cents better than the consensus estimate of analysts.

Egeck was appointed chief executive officer of the Hurley unit of Nike Inc. in September.

Revenues were up 16.8 percent to $108.4 million from $92.8 million, paced by a 33.5 percent increase in direct-to-consumer sales, to $61.8 million. Comparable sales, including stores in operation more than a year and e-commerce, bounded ahead 10.2 percent. International sales rose to $23.5 million, helped by the adoption of a direct wholesale model in Germany and the U.K. U.S. wholesale revenues slipped 18.3 percent, to $22 million, as increased shipments to specialty stores weren’t sufficient to compensate for planned declines in sales to the off-price channel and softness in women’s denim at department stores.

Speaking of department stores, Lynne Koplin, president, said on a late afternoon conference call, “Retailers have shifted their merchandise assortments to nondenim bottoms and reduced their investment in denim. While we continue to work with our key partners in the majors channel to match our collection with their changing merchandise assortments, our sales trend is not expected to be positive in the next few quarters.”

However, with its sales mix shifting more toward retail and global activities, gross margin leaped 270 basis points to 64.8 percent of sales from 62.1 percent in the year-ago quarter.

In the nine months, net income grew 10.1 percent to $30.5 million, or $1.22 a diluted share, as sales were up 18.8 percent to $300.4 million.

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