Shares of True Religion Apparel Inc. rose nearly 10 percent in after-hours trading Tuesday after the premium denim brand reported better-than-expected sales and profits and initiated a quarterly dividend.
This story first appeared in the May 2, 2012 issue of WWD. Subscribe Today.
Sales in the quarter were paced by 22.6 percent growth in the U.S. direct business, including a 13.3 percent jump in comparable sales, a combination of same-store and e-commerce revenues. Sales of nondenim sportswear rose to 33 percent of U.S. direct revenues from 30 percent during the first quarter of 2011, according to Lynne Koplin, president of the company, with the men’s business performing especially well. Women’s has been more challenging within the company’s wholesale operations, although Koplin said, “I think we’ve stabilized it.”
In the three months ended March 31, net income rose 15.9 percent to $10.4 million, or 41 cents a diluted share, from $9 million, or 36 cents, in last year’s quarter. Earnings per share results were expected to be flat.
Sales were up 13.9 percent to $106.8 million, from $93.8 million a year ago, well above the $102.4 million anticipated, on average, by analysts. The company’s U.S. direct business grew to $65.5 million, while U.S. wholesale and international sales were up 2.8 percent and 3.6 percent, respectively, to $21.4 million and $19.1 million. U.S. direct accounted for 61.3 percent of sales, up from 56.9 percent. Gross margin dropped 30 basis points to 64.5 percent of sales.
“In our international segment we achieved net sales growth even as we repositioned our wholesale operations in Korea, and continued strength in sales in the specialty store channel drove the increase in our U.S. wholesale segment,” said Jeffrey Lubell, chairman, chief executive officer and chief merchant of the Vernon, Calif.-based company.
The company will pay a quarterly dividend of 20 cents a share on May 29 to shareholders of record May 15. It also has earmarked $30 million for stock repurchases to be conducted on the open market and with the “primary objective” of offsetting share dilution attributable to stock-based compensation. “With our history of generating significant cash flow and no long-term debt, we are in a position to take advantage of profitable growth opportunities while we also return capital to our shareholders,” Lubell said.
Pete Collins, chief financial officer, said that second-quarter earnings would be pressured by a slowdown in international sales even as the consumer direct and wholesale businesses in the U.S. meet or exceed expectations. Second-quarter EPS is expected to be 35 cents a share, below the 38 cents analysts had estimated.
Shares closed Tuesday at $27.88, up 72 cents or 2.7 percent, prior to the earnings disclosure, but added $2.62, or 9.4 percent, to move to $30.50 in the first hours after the end of the trading day.