True Religion Apparel reiterates revenue and earnings outlook
In a Tuesday afternoon investor conference, True Religion Apparel, Inc. (Nasdaq: TRLG) executives said revenue and consumer demand for the company’s premium denim products will continue to grow. The Vernon, Calif.-based company expects $167.1 million in revenue during 2007, up from $139 million in 2006. The clothing maker also reaffirmed guidance for annual earnings-per-share of between $1.24 and $1.27.
“We continue to take away market share from competitors,” Michael Buckley, True Religion’s president, told investors. “True Religion is consistently No. 1, No. 2 or No. 3 among the retailers it receives information from. These stores are simply printing money.”
Buckley said the publicity of taste-making celebrities is helping to drive demand. He cited celebrities such as Beyoncé, Paris Hilton, David Beckham, Jessica Simpson, Britney Spears and Alex Rodriguez who have been pictured in magazines wearing True Religion products. Rodriguez was infamously pictured in the New York Post wearing a pair of the company’s jeans with an exotic dancer who was not his wife. One of Buckley’s presentation slides showed a picture of hotel heiress Paris Hilton going to jail with the caption: “Off to the big house in her True Religions.”
The company’s financial good news looks likely to continue. Demand is higher than ever and gross margins of more than 56% are “here to stay,” said CFO Pete Collins. He said the company also expects operating margins to expand.
The company’s financial health has been propelled by a number of encouraging factors. The average price and number of pairs of jeans owned is increasing, Buckley said. He said the company’s target audience is large and growing, with an average household income of over $100,000. The company’s jeans retail for more than $200.
“As we continue to innovate, we don’t see any resistance to price,” Buckley said. “We firmly believe we have the best fit in the marketplace.”
The average transaction of a customer - of whom 53% are women and 41% men – in a True Religion retail store is $265, Collins said. He said all of the company’s stores do a 35% return on invested capital. The company plans to have at least 30 stores open in 2008, at least 50 in 2009. Currently, Japan, Britain, Germany, Canada and South Korea represent 80% of True Religion’s international sales.
Buckley said True Religion is diversifying by offering a greater product mix. This year, the company is expanding into belts, fragrances, bedding, sunglasses, watches, active wear and hosiery.
In today’s trading, shares of True Religion are down $0.43, or 2%, at $21.64. Over the last 52 weeks, the company’s shares have fluctuated between $23.88 and $14.65.
Click here to see True Religion's Small Cap Spotlight.
