True Religion Apparel Inc. Reports Operating Results (10-K)
True Religion has a market cap of $681.4 million; its shares were traded at around $26.55 with a P/E ratio of 14.4 and P/S ratio of 1.6. True Religion had an annual average earning growth of 26.6% over the past 10 years.
Highlight of Business Operations:Our net sales categorized by gender were approximately as follows: men53%, women44%, and kids3% in 2011; men48%, women48%, and kids4% in 2010; and women55%, men41%, and kids4% in 2009. Our largest retail product category in terms of units sold in 2011, 2010, and 2009 was denim bottoms, which accounted for 50%, 72%, and 56%, respectively, of total units sold in our U.S. Consumer Direct segment. The average sales price for our denim pants in our full price retail stores was $255 in 2011, $246 in 2010, and $251 in 2009.
Operating income totaled $74.6 million, an increase of 6.7% from 2010. Operating margin was 17.8% in 2011 versus 19.2% in 2010. Included in the operating margin in 2011 and 2010 was $1.2 million and $4.3 million, respectively, in net separation costs. Excluding the net separation costs, the adjusted operating margin was 18.0% in 2011 compared to 20.4% in 2010. The operating margin decline was primarily due to the expansion costs made in the International segment to take control of sales and support long-term growth and the planned $10 million reduction in our Off price net sales.
U.S. Consumer Direct net sales increased by 46.6% to $189.1 million in 2010, primarily because we opened 24 stores in 2010, finishing the year with 94 stores compared to 70 stores at the end of 2009. In addition, our same store sales increased 9.6% as we introduced a strategy to offer new styles regularly in our retail stores.
U.S. Consumer Direct operating margin decreased from 34.7% in 2009 compared to 34.2% in 2010, primarily due to the decreased gross margin as a result of a higher percentage of the segment's sales coming from the lower-margin outlet stores as compared to the full price stores and an increase in sales of lower-margin sportswear.
Net income attributable to True Religion Apparel, Inc. was $43.5 million, or $1.75 per diluted share, for 2010 compared to $47.3 million, or $1.92 per diluted share, for 2009. The separation costs of $4.3 million ($2.7 million net of taxes) reduced our diluted earnings per share attributable to True Religion Apparel, Inc. by $0.11 for 2010. Net income attributable to True Religion Apparel, Inc. excluding separation costs for 2010 would have been $46.2 million, or $1.86 per diluted share. The remaining decrease in net income attributable to True Religion Apparel, Inc. and diluted earnings per share attributable to True Religion Apparel, Inc. is primarily due to the overall slowdown in sales of women's premium denim at the major department stores.
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