True Religion Apparel, Inc. Q4 2008 Earnings Call Transcript

Feb.26.09 | About: True Religion (TRLG)

True Religion Apparel, Inc. (NASDAQ:TRLG)

Q4 2008 Earnings Call

February 25, 2009 4:30 pm ET

Executives

Laura Foster - ICR, Inc.

Jeffrey Lubell - Chairman of the Board, Chief Executive Officer & Chief Merchant

Michael F. Buckely - President

Peter F. Collins - Chief Financial Officer

Analysts

Karen Short - FBR Capital Markets

Todd Slater - Lazard Capital Markets

Jeff Mintz - Wedbush Morgan Securities Inc.

Christine Chen - Needham & Company, LLC

Eric Tracy - BB&T Capital Markets

Jody Kane - Sidoti & Company, Inc.

Ronald Bookbinder - Global Hunter

Mimi Barteau - Chelsea Advisory Group

Operator

Good afternoon ladies and gentlemen, thank you for standing by.Welcome to True Religion Apparel, Inc. 2008 fourth quarter and fiscal year conference call. During today’s presentation all parties will be in a listen only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference call is being recorded today, Thursday, November 6, 2008. I would now like to turn the conference over to Laura Foster of Integrated Corporate Relations.

Laura Foster

Good afternoon everyone and thank you for joining us today to discuss True Religion Apparel’s fourth quarter and fiscal 2008 financial results. On the call today are Jeff Lubell, True Religion’s Chairman and Chief Executive Officer, Michael Buckley, the company’s President and Peter Collins, the company’s Chief Financial Officer.

By now everyone should have access to the fourth quarter and fiscal 2008 earnings release which went out today at approximately 4 pm Eastern time. If you have not received the release, it is available on the investor relations portion of True Religion’s website at www.TrueRelgionBrandJeans.com by clicking on the investor relations tab.

This call is being webcast and a replay will be available and archived on the company’s website. Please note that all the information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call True Religion management will be providing financial guidance and making other forward-looking statements regarding expected future financial results and business opportunities.

The Company’s actual future results may be very different from our current expectations. We encourage you to read the 10Qs, 10Ks and other reports that we file periodically with the SEC. These documents contain a discussion of the risks facing our business including factors that could cause these forward-looking statements to not come true. The Company does not currently intend to update these forward-looking statements except as required by law.

With that said, it is my pleasure to turn the call over to Jeff Lubell. Jeff?

Jeffrey Lubell

Thank you Laura and good afternoon everyone and thank you again for joining us as we discuss our fourth quarter and full year 2008 results. We are great and we appreciate your continued interest in True Religion. We are pleased with our fourth quarter results which marks a solid finish of 2008. We delivered our fifth consecutive quarter of net sales and earnings growth ahead of our expectations. We view this as strong accomplishment particularly in light of the economic and consumer environment. Throughout 2008, we stay true to our business plan and continue to execute against our long term growth strategy.

The results of our conviction or reflect in our positive fourth quarter and full year 2008 results. For the fourth quarter we grew net sales 38% to $73.0 million from $52.7 million with each of our business segments posting solid sales gains. We attribute our performance for our ability to deliver high quality, unique, innovative and fresh products to the marketplace supported by our multi channeled distribution model.

Sales within our US whole sale business increased 14% led by continued market share gains with majors. These grew was partially offset by continued weakness in boutiques as many of this small and retailers are more susceptible to the downturn in the economy due to sales and inventory growth being closely related to credit. International net sales increased 27% in the fourth quarter as our jeans and related jeans sportswear product continued to resonate well with our international customer and consumers.

Sales within our own consumer direct segments increased 112% in the fourth quarter led by the expansion of our branded retail store base of 14 stores at December 31, 2008 compared to 15 at the end of the fourth quarter of 2007. This performance validates our belief that consumer are willing to pay full price for merchandise that is innovative and well fitting. We believe our fourth quarter results from particularly note where the enlighten of the growth deliver in the comparable 2007 quarter in which net sales increased 72% over the same period in 2006.

Turning to our full year result, the company delivered against this financial and operational objectives for its full year we delivered year over year net of sales growth of 56% to $270 million from a $173.3 million and we grew net income in excess of 59% to $44.4 million or $1.83 for diluted share from $27.8 million or $1.16 per diluted share in the prior year.

From a balance sheet perspective our financial position has never been stronger. We ended the year with $57.2 million in cash and no debt. In 2008, we generated $49.1 million in operating cash flow. As with the fourth quarter, all of our segments delivered strong net sales gains in 2008 as compared to 2007. U.S. hold sale increase 37% in 2008 with majors posting 58% sales book year-over-year net. Net sales to majors were driven by an increased penetration of the True Religion Brand and continued market share gains.

Throughout 2008, we continue to be a top selling brand among our key wholesales customers as consumers sold our premium denim that was not only of the highest quality but also as fresh and compelling. It is our belief that retailers recognized our demand for innovation and continue to outfit more dollars for True Religion. Product is a part of our brand and we are committed to not only introduce new product to the market place but also to evolve in a way that resonates well with a sense of new news to customers.

On the international front, net sales increased to 26% over 2007. The net sales increase were partially offset by a decrease in sale expense. In 2008, we established our own subsidiary responsible for managing our Japanese wholesale and retail businesses. Our international momentum expanded throughout the year and our product offering a lot of to cut through price resistance caused by the strengthening of the U.S. dollar in the second half of 2008.

As we mentioned at the beginning of the year, we anticipate that our customer direct segment will deliver exceptional sales performance and we delivered a net sales increase of 157% over 2007. Turning to our guidance, before Pete and Michael share their comments on our business plan for 2009, let me offer my high level perspective. As many of you are acutely aware, we are offering unchartered-territories and our market place is experiencing rapid changes. While True Religion is certainly not immune to this events, we remain acutely attuned to the changes in the macro environment with a focus on monitoring key trends such as sales backlog, inventory levels and variables spending.

However, I want you to reiterate that we have experienced these challenges albeit to a lesser degree in the past since our inception over five years ago. We have evolved our business, plan to meet these challenges and we will continue to do so. Our business plan is a proven one and one that has left it throughout, the recent changes in the global environment. At the core of our strategies is developing amazing products that customers will desire.

As many of you have heard me say it is all about the product. I believed that this is the recipe for our success.

In this environment consumers are seeking new niche. They are demanding more from their product and we are committed to delivering that to them. We are able to use our financial resources to create more direct contact with our consumers both domestically and abroad. I believed that our integrated approach of growth continuously delivered fresh products with more consumers who are owned-retail stores and expand our presence of the True Religion Brand worldwide and continues to be the right path in 2009 and beyond.

In the Company’s five plus years we have assembled great external resources throughout our business. For instance, all of our women and men jeans are made in the USA. In fact, they are made within our four walls of our corporate office.

This gives us speed to market and product flexibility which are our intangible assets in this changing environment. Our business plan grows on these external resources to help our Company remain fashion forward and market focused.

In summary, we could not be more pleased with our performance in 2008 and our fourth quarter and full year results reflects strong brand momentum across both our wholesale and retail channels. We believe our performance serves as a testament to the product, the business model, and the growth strategy we have in place. We are especially pleased as we exited the year with the appropriate resources to continue to grow the True Religion brand by introducing our products to more customers across the globe. We look forward to building upon our positive momentum in 2009.

That concludes my comments. I would now like turn the call over to Pete to discuss our fourth quarter and full year results in more detail and provide an overview of our 2009 full year guidance. Pete.

Peter Collins

Thanks Jeff and good afternoon everyone. I will start with a detailed discussion of our financial results for the fourth quarter, followed by a brief discussion of our 2008 full year results then I will provide some commentary on 2009 guidance.

Net sales for the fourth quarter increased 38.5% to $73 million versus $52.7 million in the fourth quarter of 2007. Within our US wholesale segment, sales for the fourth quarter increased 14.4% to $36.4 million versus $31.8 million in the prior year period. The increase in the US wholesale segment net sales was driven the growth in sales and majors, partially offset by a decline in sales to boutique, as these retailers continue to be challenged by the economic slowdown specifically because many of them depend on short term credit for their merchandise purchases.

International wholesale sales in the fourth quarter increased to 27.4% to $11.8 million from $9.2 million the prior year. Increased sales for our European and North American distributors were approximately offset by a year-over-year reduction in sales to Japan.

Consumer direct sales which include our branded retail stores in eCommerce side increased 112.6% during the fourth quarter to $24.4 million from $11.5 million in the prior year period. The growth in our consumer direct segment is attributable to the expansion of our retail stores which totaled 42 at the end of the fourth quarter 2008 compared to 15 retail stores to the end of the fourth quarter of 2007.

Fourth quarter net sales also included $453,000 of licensing revenues which is included in our other segments. As it relates to the three primary components of our business, 58% of our net sales came from women’s merchandise, 38% from men and 4% from kids.

The average sales price in our full price retail stores were $205 for women, $207 for men and $114 for kids. So, the fourth quarter, 78% of the sales in our retail stores were jeans and 22% were sportswear and for the full year, 76% of sales in our retail stores were jeans and 24% were sportswear.

Gross profit grew by 43.6% to $43.3 million or 59.3% of net sales from $30.1 million or 57.2% of net sales in the fourth quarter of 2007. The improvement in gross margin reflects the ongoing segment in next shift towards our higher margin consumer direct business, partially offset by a decrease in net sales boutique customers which produce a higher gross margin than our other wholesale customers.

Gross margin by segments for the fourth quarter is as follows. Consumer direct was decreased of 280 basis points to 74.8% from 77.6% in the prior year quarter. US wholesale gross margin was 51.5% compared to 51.6% in the prior year quarter, and international gross margin decreased 40 basis points to 49.3% from 49.7% in the prior year quarter. The decrease in gross margin for our consumer direct segment was due to discounts taken on slow-moving merchandise at our outlet stores.

Selling, general and administrative expenses for the quarter increased 51.8% to $23.4 million from $15.4 million in a prior year period. SG&A expenses for the fourth quarter of 2008 include growth in consumer direct operating costs of $5.8 million.

Operating income for the fourth quarter increased 35% to $19.8 million or 27.2% of net sales compared to $14.7 million or 27.9% in net sales in the prior year period. The year-over-year reduction in operating margins was primarily driven by increased operating expenses associated with the expansion of the consumer direct segment.

Our effective tax rate for the fourth quarter of 2008 was 36.5% compared to 41% in the prior year period. The reduction in effective tax rate on a year-over-year basis was results of the Company’s implementing a tax planning strategy in 2008 that retroactively changed our filing status with certain stage. In addition, the 2007 effective tax rate was impacted by a significant amount of 2007 executive compensation that was not deathful for income tax purposes.

Net income for the 2008 fourth quarter was $12.7 million or $0.53 per diluted share based on weighted average shares outstanding of $24.1 million compared a net income of $8.9 million or $0.37 per diluted share based on weighted average shares outstanding $24 million in fourth quarter 2007.

For the full year ended December 31, 2008, net sales increased 55.8% to $270 million from $173.3 million in 2007, bringing this growth with our consumer direct segment with the net sales increased of 157% over 2007 received $75 million in sales in 2008.

The primary growth drivers were the addition of 27 branded stores to our retail base and to a lesser degree positive same store sales growth in our comp store base for the year.

US wholesale net sales increased 38% to $153 million in 2008 with sales to majors leading the net sales increased. They were up 58% over 2007. Majors now represent our largest customer type in the US wholesale segment followed by boutiques.

Boutique net sales were challenging in the second half of 2008 ending the year down 11% versus 2007. Sales to the off price channels increased as a percent of total sales in 2008 as we aggressively manage our inventory investment in light of the deteriorating marketplace.

Our international sales increased 26.2% in 2008 with the largest sales increases scene in Europe and North America. Offsetting this trend was the decrease in sales to Japan as we have transitioned to do our wholly owned subsidiaries over much of 2008.

Operating income in 2008 was $68.9 million, a 46% increase over 2007. The growth in operating income was below that of the 2008 net sales increase to the ongoing infrastructure investments including the expansion of our consumer direct segment, the launch of a national marketing campaign, the establishment of our Japanese subsidiaries and the addition of several senior positions across operating disciplines as we enhanced our infrastructure.

Net income in 2008 grew by 59.3% to $44.4 million or $1.83 per diluted share from $27.8 million or $1.16 per diluted share last year.

Turning to our balance sheet, we are pleased with our overall financial position which continues to strengthen. We ended the year with $57.2 million in cash and cash equivalents representing a $1.4 million increase from $55.8 million as of September 30, 2008. The increase in our cash balance was driven by cash flow from operations generated with fourth quarter.

For the full year 2008, we are generating cash flow from operations of $49.1 million which is only $5.6 million less than the sum of our net income and net stock-based compensation expense.

As a retail environment became increasingly challenge in 2008, we proactively tied merchandise purchases closer to our order book which resulted in inventory growth of 24%, which is less than half of our 2008 sales growth.

Operating cash flow was used to fund the expansion of retail stores and for other financing activities with the net increase invested in the US treasury only mutual fund. Inventory totaled $25.8 million at December 31st, 2008, a $1.8 million decrease from $27.6 million at December 30, 2008. The sequential reduction is primarily due to the efforts I just spoke of to link our merchandise planning to our sales order book.

Our annual inventory churn rate for the fourth quarter remained consistent with the third quarter at four times per year. We are satisfied with the position of our inventory which we believe provides us the necessary flexibility to manage the growth of our consumer direct and wholesale businesses. I am pleased to say that we carry no debt and we continue to fund our growth from internally generated cash and turn operations.

With that, let me now turn to our financial guidance for 2009. We are initiating our full year guidance as follows: net sales for fiscal 2009 are expected to be in a range of $290 million to $297 million, representing an anticipated net sales increase of 7% to 10% compared to 2008 net sales of $270 million.

EPS is expected to be in a range of $1.73 to $1.81. Our 2009 EPS guidance reflects fully diluted weighted average shares outstanding of approximately $24.6 million compared to $24.3 million in 2008, and an effective tax rate of 36.9% which is a 30 basis point increase from 2008 rates.

Our guidance reflects the following key assumptions. For our US consumer direct business, forecasted net sales growth as compared 2008 of 60% to 65% will be driven by the addition of net sales from 27 stores open in 2008 plus 25 new branded retail stores that will open in 2009. This equates to at least 67 branded retail stores at year end.

With respect to our existing store base, we are assuming mid-single digit sales growth of our 2008 comp store base in 2009 versus 2008 as these stores mature. It will be partially offset by an assumed low-double digit sales decline within our 2007 and 2006 comp store base.

For our 2009 new stores, we have not changed the sales plan that we developed when we reevaluated each locations. We currently expect our consumer direct segment gross margin for the full year 2009 will be in line with the lower margin rate we experience in the fourth quarter of 2008, as we expect the reduction in the portions of our outlet sales from higher margin irregulars and higher markdowns in our outlet stores due to the price sensitive nature of this customer.

Within our US wholesale business, we anticipate that the net sales would decrease 17% to 19% on a year-over-year basis driven by a sharp decline in sales to boutiques and a mid-single digit decline in sales to majors and off price retailers. We do not off the boutiques about a discount and so we earned a higher gross margin on these sales. We expect that the anticipated mix shift towards majors may adversely impact the operating margins to the segments.

Within our international wholesale business, net sales growth is expected to be on a low-single digit as compared to 2008 and will be driven by assumed increases in net sales to Japanese wholesale customers with quite sales trends on other international markets, where there is a goal to add at least one store in Japan by year end. We have not budgeted any new stores in Japan in 2009.

Our 2009 net sales guidance includes $3.1 million of licensing revenues. Growth within our licensing category will primarily come from further development of existing categories. We have not budgeted additional licensing revenue from any new license agreements. We plan to increase our marketing spending by $2 million in 2009 versus 2008. Michael will discuss our plan on this investment in his remarks.

Our 2009 guidance includes $10 million of stock-based compensation, flat with our 2008 stock-based compensation level. These compensations depend upon achievement of earnings based target. It is worth noting that in 2009 more members of our leadership team are participating in the programs that award stock-based compensation upon the achievement of earnings target. The 2009 quarter-by-quarter stock-based compensation amounts are expected to be similar to the 2008 amount.

Preopening costs for the 25 new stores in 2009 are expected to be in lined with the preopening costs we incurred in 2008. While we are not in the practice of providing quarterly guidance, we do feel it is appropriate to provide direction as to how we see results trending throughout the year. At this time, we expect that sales growth by quarter will be consistent throughout the year. Additionally, we expect that each quarter’s earnings contribution to the total year will be similar in 2009 to the corresponding quarter in 2008.

With that I would like to turn the call over to Michael to take us through a review of our operations. Michael?

Michael F. Buckely

Thanks Pete and good afternoon everyone. We are pleased to report that the fourth quarter marked a continuation of the strong momentum we delivered in the first nine months of 2008. We posted sales gains across each of our business segments and delivered out sixth consecutive quarter of double-digit earnings growth.

Our performance in the fourth quarter and full year 2008 speaks to the strength and breadth of our multi-segment distribution platform. In the fourth quarter, we delivered year-over-year sales growth of 38.5% with approximately 49.8% of the business coming from US wholesale, 16.1% coming from international wholesale and 33.5% from our consumer direct business. As we continue to expand branded retail store base here in the US with the goal of reaching 80 stores by year end 2010, we think we will be approaching our long term sales contribution goal of 50% consumer direct, 45% wholesale and 5% licensing.

Turning to our US wholesale business, as with the first nine months of 2008, sales through the majors continued to be strong, due primarily to further penetration within existing doors, and well the majors like many other retailers felt the impact of the economy and experienced deteriorating sales trends throughout 2008. The premium denim category continues to be a strong performer and particularly fashion denim, where True Religion competes.

True Religion competes primarily in the over $200 price category, which according to many of our wholesale customers is the category that continues to outperform. Despite the higher price points, consumers are willing to pay a premium for products that deliver an exceptional fit and as fashionable, compelling and distinctive.

We believe that consumers can easily recognize True Religion for delivering these characteristics, and as a result, True Religion continues to gain market share within our premium wholesale accounts as retailers continue to increase a number of styles offered by our brand.

Sales to boutiques in the fourth quarter declined 36.3% compared to the prior year period. As the economic conditions worsened throughout the year, we saw a corresponding negative trend in sales to this channel. We suspected some of the consumers will previously purchased True Religion merchandise through this channel shifted their buying to majors and our own retail stores as boutiques were not always able to offer the new styles.

During the fourth quarter, we continue to utilize the off price channels, albeit at a reduced pace from the third quarter to manage past season merchandise and keep our inventory levels clean. As a result, while sales of the off price channel increased year-over-year, sales declined on a sequential basis which helped drive the improvement in our US wholesale gross margin in the fourth quarter as compared to the third quarter.

With respect to our US wholesale business for the first quarter of 2009, our US wholesale, sales order books were down 3% as of December 31st, 2008 as compared to year end 2007. As Pete mentioned, we remain conservative on sales outlook for this channel and as we are seeing our key retail partners exercising greater caution with future order commitments and in response to the challenging retail environment and uncertainty in the domestic macro environment. However, we recently showcased our collections at the Project Show in Las Vegas and Coterie Show in New York and response and traffic in our booth was better than expected and very positive.

With respect to our international business, our largest markets are Europe, North America and Asia. In 2008, 80% of our international sales came from our five largest distributors in Japan. So, the first quarter of 2009 our international wholesale order book is up approximately 25% as of December 31st, 2008 as compared to year end 2007. We are pleased with the international order book increased. However, we remain cautious on the sales outlook due to the increase in the US dollar exchange rates versus major foreign currencies.

With respect to Japan, we currently operate two outlet stores and are actively looking for store location and major cities, including Tokyo and Osaka. We are distributed in approximately 250 wholesale doors and importantly, the right doors. Our growing up wholesale business in Japan will be increasing penetration of True Religion Apparel and many of our existing wholesale accounts.

Outside in Japan, there are several ways to build the branded long term including 1,000 joint ventures, franchisees, direct subsidiaries and wholesale distributors. However, at this stage, we are committed to fully understand the dynamics of a market-by-market basis before moving forward within a defined strategy. As Japan represents our first significant direct investment in an international market, we will take our learning and evaluate additional markets where it makes sense to establish a direct retail presence.

In markets where we will determine that direct approach is not appropriate, for our franchise, joint venture and wholesale distribution opportunities. As we have stated in the past, we view the international growth opportunity for the brand as significant and overtime, we believe the size of the international business could exceed that of our US business.

In order to grow the brand to its fullest potential, we will need to continue to invest in the growth of the brand internationals. Our plan for 2009 anticipates hiring a senior level international executive to directly expansion of our wholesale and retail presence in Asia, particularly in China, Hong Kong, Macao, Japan and South Korea.

Turning back to our US consumer direct business, our fourth quarter and 2008 performances reflect a significant increase in our store accounts on a year-over-year basis. At 2008 year end store base of 42 stores is comprised of 32 full price and 10 outlet locations. Going forward, we are targeting one hour for every three to four full price stores.

In January of 2009, we opened new stores at Mall of Millenia Orlando, Somerset Collection in Troy, and 14 Wall Street in New York City bringing our total store counts of 45 branded retail stores. We expect to open three more stores over the balance of the first quarter and 18 stores in the second quarter.

Our pre-opening costs for the first quarter of 2009 are expected to be approximately $600,000 compared to $421,000 in the first quarter of 2008.

Looking to the remainder of 2009, we are on track for our goal of 25 new stores in 2009 bringing our 2009 target store counts to 67 stores. In addition to expanding our presence in existing market such as Miami, Los Angeles and New York, we are also entering several new markets in 2009 including Seattle, Cortland, Denver, Scottsdale and Orlando. Overall, we believe that the slate of our new stores in 2009 is better than the 2008 new stores as we are opening more A centers.

We are especially pleased that we are able to leverage our strong financing position to secure opportunistically and negotiate more favorable lease terms. Throughout 2008, we are pleased with the performance of our retail stores. We finished the fourth quarter ahead of our retail sales plan for the quarter. For the year, the average sale per square foot was $1,292. The decrease in average sales per square foot versus last year reflects our expansion into some B location. These locations which we do not expect to deliver the sales volume as our A location are still budgeted to deliver an operating margin ahead of our 30%+ hurdle rate.

Our ability to deliver on our operating margin target reflects more favorable leases and rent terms associated with such B locations. For 2008, our stores achieved a gross margin of 76.7% and delivered a full year operating margin of 40.3%. Operating margin for the 2008 period is inclusive of $2.3 million of pre-opening cost which equates to approximately 3.3% of sales. Excluding these pre-opening costs, our full year operating margin was 43.6%.

It is important to note that our stores in the first year are budgeted to deliver a 30% full year operating margin. We carefully evaluated the characteristics of each store locations taking into consideration our ability to negotiate store cost and our ability to deliver the 130%+ operating margin in order to develop a unique sales plan for each of our stores.

What distinguishes True Religion retail store concept from the rest is that we have created a unique shopping experience that offers the higher level of customer service and a comfortable shopping environment. When visiting our stores, you receive a shopping experience that we believe stands out in today's market place. A visit to our retail stores includes sitting down to denim bar while our sales associate show you our collection and help you find the right style and fit.

We believe that in creating a more comfortable shopping experience, customers will shop longer and return more frequently. As such, we are investing and expanding our sales, client telling and product training in 2009. While maximizing new customer's experience, we believe we can drive key performance metrics such as sales per hour, customer traffic conversion, units per transaction and average dollar sales. We expect to see the benefits of this endeavor as early as late 2009 with the full benefit measured in comparable stores sales increase in 2010 once the programs are fully implemented.

Turning briefly to our licensing division, our license category currently consists of headwear, footwear, swimwear and fragrance. In the fourth quarter, we launched a women's fragrance exclusively for Nordstrom and we are very pleased with the initial response. In fact in January, we are Nordstrom's top selling brand in the women's fragrance category. This month we rolled out the women's fragrances to more of wholesale accounts and on March 1, we will launch our men's fragrance.

We see additional opportunities to expand the licensing business into more categories in 2009 and believe it will be a key component of establishing True Religion as a global brand. Lastly, I would like to provide some additional color on the incremental marketing investment plan for 2009. We were pleased with the return on our 2008 marketing investment and in light of the current environment; we believe it is necessary to increase our marketing investment to increase brands awareness, reaffirm our image, and drive traffic to our domestic and international wholesale customers, our own brand retail stores and our e-commerce sites.

For 2009, we had budgeted $6.2 million for our marketing efforts versus $4.4 million that we had spent in 2008. Our marketing effort to spring 2009 includes launching a new ad campaign which will began running in February 2009. The campaign features Giselle Bundchen for woman and Ryan Heavyside for man. These images will begin running in the March issues of high end national publications such as Vogue, Vanity Fair, Elle, Harper's Bazaar, GQ, Details, Women's Wear Daily, InStyle, Teen Vogue and Maxim. These will also run internationally in such publications as Vogue Germany, Vogue UK, GQ Germany and GQ UK.

To drive traffic into our stores, we have placed ads in regional magazines such as Los Angeles Magazine and the New York Times Magazine as well as on select outdoor advertising media. While the increase in our marketing investment is substantial, it is important to note that we have the ability to adjust our marketing spend on an absolute basis based on the returns we are seeing on our marketing investments. We are focused on balancing return in the marketing spent against insuring we are supporting the brand and driving the brand awareness to insure we are well positioned when the economic recovery starts.

That concludes our remark. Operator, we would now like to open up the call for questions.

Question-and-Answer Session

Operator

(Operator's instruction) Your first question comes from the line of Karen Short - FBR Capital Markets.

Karen Short - FBR Capital Markets

A couple of questions for you. I mean it seems that the consumers in the department stores were probably frozen a little bit as of December 31. So I know you gave comments on your order bulk but I am wondering if you could maybe give a little more color on what your order book is looking like as of today given to successful, apparently successful trade shows and then I have a follow up.

Michael F. Buckely

Well I think as we mentioned in the script. What we are seeing is the department stores as well as the boutiques waiting a little bit longer to place their commitments although quite frankly from the trade show they see the product, they were clearly very excited about the new product that we are doing but we will start to see that kind of paper until maybe the next few weeks they are going to the next quarter.

Karen Short - FBR Capital Markets

Okay and then I am wondering if you could comment on the stock sales that hit the tape just after you guys have reported.

Peter F. Collins

Karen, those were just related to shares that were tied to our performance this year and that is actually, there is a footnote in the form quarters document that there is a shares that were being withheld to pay taxes on the shares invested. So remember the way that it works is when the Company awards restricted stock to management, the SEC rules required that we present the entire amount as being part of the holdings that each of us has and then when the share is best, we do a net issuance. The amount that is withheld to pay the income taxes is treated as the reduction of the outstanding amounts that we hold even though it is really just tax withholding.

So that is the same way with the form fours you saw from Michael and Jeff that we filed last month.

Karen Short - FBR Capital Markets

Okay and just to clarify, you made a comment about the cadence of sales and earnings by quarter in 2009. Were you saying that sales if you look at 2008 as a pattern, sales in each quarter as a percent of the full year and earnings for each quarter as a percent of full year earnings should be similar in 2009 or was it just a comment related to sales? Can you just clarify?

Peter F. Collins

Well, like we were trying to say, we were expecting the sales growth that we have laid out to be consistent quarter to quarter and then as far as the earnings go, the portion of earnings for each quarter to the total earnings for the year to be consistent year-over-year.

Karen Short - FBR Capital Markets

Okay so basically you are just assuming that whatever the environment is today, there is no change.

Peter F. Collins

That is right.

Operator

Your next question comes from the line of Todd Slater - Lazard Capital Markets.

Todd Slater - Lazard Capital Markets

I witnessed the excitement firsthand by retailers for your brand other project so that was very tangible. I also keep hearing that your brand is quite hot right now with retail so quite an anomaly too if I say. But I am wondering, you said you do not expect these orders or so for a month, I am wondering if that tied in all to your current guidance or might or is that potential upside should they come in stronger than you had originally expected.

Michael F. Buckely

Well, I think a lot of the orders that we wrote at the show, some of them are immediate orders and then clearly we are going to want to get to those as soon as possible so we can hopefully impact the first quarter but we were off to selling summer which will hit the second quarter as well as full and clearly, the majors, they see your line, they got excited, they take their notes, they put together a plan and then they will bring that paper a little bit further out so…

Todd Slater - Lazard Capital Markets

But it sounds like you, for example you wholesale guidance was very, very conservative, I understand why in this environment. I am just wondering if that includes some of this increased excitement.

Michael F. Buckely

Well, again, we saw the excitement. We have seen the excitements turn into effective orders yet so we have not changed any of our assumptions based on just that momentum of the shows.

Todd Slater - Lazard Capital Markets

Got it, okay. And then just by my calculation, it looks like you are setting about $0.05 a share more in marketing this year than last year. Could you also just tell us where that couple of million dollars is going into by bucket in terms of…?

Michael F. Buckely

It is mainly going into consumer print as well as regional prints and regional marketing and in mall marketing to drive traffic to our stores on that side as well as we are using a little bit more expensive models but overall we feel that in this environment, we need to spend clearly the marketing spend next year will be a significant increase as compared to the sales increase but we feel we need to do that to continue to drive traffic into our wholesale accounts as well as our own branded retail stores both domestically and abroad.

Todd Slater - Lazard Capital Markets

Okay and then I just have a question international or other people get on, Japan has been down obviously over the last couple of years due to that change in the distributor model and I am just wondering, it sounds like that transition is over and are you now expecting Japan to start growing again and do you think you can never get back to that kind of $30 million type of number you did in the past especially given you increased breadth of product?

Michael F. Buckely

Well, we are definitely seeing an increase in Japan this year. In terms of getting back to the $30M, I think we are investing in a business there to be able to go wholesale the right way and the right doors as well as being able to build retail. So we have said previously that we are not going to invest in a subsidiary that we do not think can grow to us $30 million or $50 million business down the road. So we do expect it to surpass what it was in the past but in the right way, not over distributed.

Todd Slater - Lazard Capital Markets

And when do you, I think you have a couple of inherited stores there, when you do you start to build your own stores there or in other cities internationally?

Michael F. Buckely

Well, we have been looking at, probably with the economy as in Japan that there is still some fairly expensive deals so we are actively looking. We did not budget anything this year but we are hoping that we can lend one and start building stores this year.

Operator

Your next question comes from the line of Jeff Mintz - Wedbush.

Jeff Mintz - Wedbush Morgan Securities Inc.

Thank you very much for all the detailed information, it is very helpful. Pete, on that note, I want to sure I understand though and I apologize but would you mind repeating what you said about comp store expectation? I think you had it broken down based on when the stores will open?

Peter F. Collins

Sure. What we were saying is that for the stores that open in 2008 that we are expecting them to have a mid single-digit increase in 2009 and then for the stores that opened in 2006 and 2007 so really our true comp stores, they are going to have a low double-digit decrease. And then the third category is the stores that are new in 2009 and what we said there is that we have not backed up the original sales plan that we developed and we went ahead and made the decision to go forward with those stores.

Jeff Mintz - Wedbush Morgan Securities Inc.

Okay and can you just present the difference between the 2006, the 2007 versus the 2008 stores? Is that because of the aging of the stores or you think it is more because of the location selection?

Michael F. Buckely

No, what you normally see is the first year after a store opens is a significant learning curve in terms of the consumers in that area finding out about the brand so in a normal environment, you see a substantial comp increase which quite frankly we did see in those 15 stores last year when they started anniversary. So we expect that the 27 stores that we opened in 2008 will perform better on a comp basis compared to the 15 stores that we opened in 2006 and 2007 that have already I will not say matured but clearly have been around a lot longer, have more recognition than the 2008 stores that just started to see a lot of new customers.

Jeff Mintz - Wedbush Morgan Securities Inc.

Okay I just want to make sure Michael that in a more normal consumer environment; I assume you would not be expecting negative comps from a store that has been open two years.

Michael F. Buckely

No, no absolutely not.

Jeff Mintz - Wedbush Morgan Securities Inc.

And then on the marketing spend, are you seeing better add rates and are you essentially getting more bank for your bucket in terms of the spend, in terms of images and impressions?

Michael F. Buckely

Well, quite frankly to a degree, not as much as you might expect. But we have increased our spent. We negotiate to the rate as good as can and we are pretty happy with some savings that we have gotten there on a book-by-book basis.

Jeff Mintz - Wedbush Morgan Securities Inc.

Okay and then finally in terms of 2009 CapEx, do you have a budget for that and how much of that is store related and how much is other?

Peter F. Collins

Well the [core tax] for the year is going to be pretty similar to what we did in 2008 and we did just over $18 million in 2008 and we opened 27 stores where it is going to be 25 stores in 2009 and then as far as kind of back office spending and maintenance spending, you add that altogether and I think we are in a similar zone in 2009 as we did in 2008.

Operator

(Operator's instructions) Your next question comes from the line of Christine Chen - Needham & Company, LLC.

Christine Chen - Needham & Company, LLC

Just curious, we are hearing through our sources two conflicting things that specialty retailers have seen sort of a slight uptick in traffic in the month of February but in women's in department stores, things would actually gotten worse and I am just wondering if you can share with us the performance of your own stores as well as in the department stores.

Michael F. Buckely

Well I would say with our own retail January was a stronger traffic but I think that was mainly driven by the first five to seven days of January where we still saw a lot of consumers out there buying in our regular stores as well as within our outlet stores and in terms of, I have not heard anything in particular in terms of the department stores with us traffic being any better in January versus February.

Christine Chen - Needham & Company, LLC

And then I guess just to piggyback of some prior questions, so the excitement that we all saw at projects you have not really factored that into your guidance, just to be clear.

Michael F. Buckely

No, we did not exactly. We put there our plans and we were pretty surprised that we had such momentum at the shelf. I mean the booth is packed the whole time as well as we just came back from Coterie in New York. So until we see the actual paper then we get the orders in but we are not going to change any assumptions.

Operator

Your next question comes from the line of Eric Tracy - BB&T Capital Markets.

Eric Tracy - BB&T Capital Markets

If we could maybe focus on US wholesale plans for the majors down in single digit, I do not think you quantify the boutiques. Can you share the percentage of what the sort of split is between boutiques and majors are at this point?

Jeffrey Lubell

As far as relative to each other?

Eric Tracy - BB&T Capital Markets

Yes, just the contribution.

Jeffrey Lubell

Yes, the majors actually passed the boutiques and they are now our largest component of the US wholesale business and so it kind of goes from majors to boutiques and then running it out as the off size we use to clear out the product season merchandise and that is really kind of the way from a significant. That is the way it goes. I would say that relatively speaking between the two, the majors are probably 10% to 15% larger in dollar terms than the boutiques these days.

Eric Tracy - BB&T Capital Markets

Okay and is it still, I remember it used to be kind of in the 600 plus doors within the boutiques. Is it part of the decline, I mean is the decline simply from a comp trend or destocking within these boutiques or is there some rationalization taking place?

Jeffrey Lubell

There are some doors that are closing. I mean you have some of the smaller accounts that were out there are going away. The thing that we see is that we are, our product is doing well with the consumer and like in Michael's comment, he talked about how the 36% decline in boutiques in the fourth quarter and we had an over 50% increase in the sales for the majors. We think it was happening some of that demand that was seen at the boutiques is shifting over to the majors because the majors are bringing in the fresh merchandise and so the consumer is going where they can get the fresh styles from True Religion.

So even though there are some doors that are closing, the product is doing really well and we think the consumer is going out and finding it where they can see it.

Eric Tracy - BB&T Capital Markets

Okay. So I am just following on that, in terms of what the retailer landscape looks like, Mike, on your opinion is this some more of our temporary macro thing that reverts once the macro stabilizes or does the landscape look much more, okay you got majors and essentially the company owned stores offset a much smaller boutique base?

Michael F. Buckely

Well, I would it is really a matter of credit with many of the boutiques so I mean if the macro gets better and if the business will start to get better and they are able to get credit from the factors out there, then we will be able to continue to grow that business but what is happening now is our product is retailing within these boutiques and they are not as savvy as the majors in terms of having credit lines. So, they might see a factor for one product line that is not selling meanwhile our product is selling and they have not paid the factor for us. So it is not a reflection of how we are performing. It reflects on their ability to get credit and get more of our products.

Eric Tracy - BB&T Capital Markets

Is there any assumption around continued liquidations or rationalization on some of those boutique doors in the current guidance for 2009?

Michael F. Buckely

Well we are assuming that it is going to be down significantly but we have not assumed okay that maybe the back half thing is going to get better. We have assumed that it is going to be as challenging as it was in the fourth quarter.

Eric Tracy - BB&T Capital Markets

Okay and then maybe just lastly, I very much appreciate the guidance in terms of top line and even earnings and gross margin. As we look at SG&A Pete, how should we think about that on a year-over-year basis? It seems like there is a lot of sort of puts there in terms of continuing to grow the retail stores increasing from the marketing international investment and then talk about some investments around the sales force as well just on top of maybe a lower volume and the deleveraged with that. Just how we should we think about SG&A either from a dollar percentage basis?

Peter F. Collins

Well I think that when you think about the run rate we round in the fourth quarter, Eric, the only other category that we did not mention and that we did not really call out was just the run rate of the current business especially in our infrastructure here, we did made some investments in 2008 as to set the stage and have solid foundation but most of those investments and resources are based into the fourth quarter.

So I think that that run rate that we see coming out of the fourth quarter is a pretty good one to think about as far as where we are heading in 2009 and we talked about some of the things that had been somewhat variable in the past like marketing, like stock-based compensation and then you got the store growth but I think that we did not talk about the overall comment that I have is that it is going to be pretty consistent with what you saw in the fourth quarter.

Eric Tracy - BB&T Capital Markets

Okay and then lumping as to the marketing spend or is it pretty smooth throughout the year?

Michael F. Buckely

Well I think it is fairly consistent to how was the last year. I mean usually going into the March and April are the strong months and September and October are strong months as well in terms of when most of the major books get.

Operator

Your next question comes from the line of Jody Kane - Sidoti & Company, Inc.

Jody Kane - Sidoti & Company, Inc.

Can we just expand a little bit on the boutiques portion? Going forward, do you see more door closures on the boutique side or do you think most of the weaker players have already been weeded out and it is just a matter of the same kind of volume, just the different doors?

Michael F. Buckely

We actually look at the amount of boutiques we are selling in January versus where we were a year ago January and it is actually down about 5% in terms of the number of accounts. So clearly it is a lot of accounts that are out there that are just having challenges with the credit market.

Jody Kane - Sidoti & Company, Inc.

Alright and then on the department store side, are you taking market shares some of the weaker competitors move out of the denim business?

Michael F. Buckely

Absolutely. I mean we have been seeing that really for the last 18 months and with lots from 20 to 10 to 5 and True Religion certainly in the number one or number two and all the doors out there we will continue to get more market share.

Jody Kane - Sidoti & Company, Inc.

And then on the breakdown between the men and the women, have you said men is holding up a little bit better or is it still women?

Michael F. Buckely

No, I think the women's was very strong last year but both the men's and women's business overall is at the levels that we expected to be at.

Jody Kane - Sidoti & Company, Inc.

Okay and then just finally, Jeff, I was wondering if you could talk a little bit about the fashion trends. What you are seeing out there whether it be leggings or other types of things that are coming up that could have affect the business?

Jeffrey Lubell

Well we do not really follow the trend. We try to do design for what we feel we want to bring forth to the market place and the skinny jeans were in and the studs are tracking really well, the stones, the sequins, pretty much the entire product line is tracking really well and we got a lot of new interesting line for both spring, summer and fall and the seasons are really right on top of each other. We had a very big group of outer wear. We did a knit group that is getting great reaction and we are starting to see a lot of reorder business or already on things that are getting fast sell-throughs in a short period of time.

So the product is really where jeans, t's, sweats, knits and embellishment, the vintage collection is doing great. We are very unique in our designs in our t-shirts and the way we process our knits and we are finding more and more people trying to ‘take our look,’ so to speak but we keep moving forward and we are not sitting here on our hands and saying, we have a great company, a great product. We are always moving forward and trying to create new trends that the consumers react to.

Operator

Your next question comes from the line of Ronald Bookbinder - Global Hunter.

Ronald Bookbinder - Global Hunter

Well, first of all congratulations on a terrific quarter and on a terrific new product line that you are showing at project. But you have got a training investment net that you are putting forth to increase conversion. How much of an increasing conversion do you need to get to pay for that training program and for each 1% of an increasing conversion, what do you think that does for revenue in your retail stores?

Michael F. Buckely

Well 1% increase in conversion, it is more than 10% increase in sales for that particular store. We think we are averaging below where we should be and yes, part of that is opening a lot of new stores and putting our staff in there and we have to get them up to speed in terms of the products and the selling skills and the client telling skills and really maximizing it.

Our goal is to bring conversion up to close to 15% over the next couple of years and we are pretty far from that now so each point means a lot.

Ronald Bookbinder - Global Hunter

Okay and you never really had a training program to push conversion before, have you? This is a fairly new thing?

Michael F. Buckely

Well, we have our sales managers and district managers out there and clearly the focus everyday is converting traffic. We are getting a lot of customers that are coming to these stores. We monitor traffic by day, by hour. We monitor sales by day, by hour. We monitor labor by day, by hour so we can really see, do we have enough labor on the flow when the traffic is coming in and we have got into that sophisticated training program that first, well of all we got to make sure that they know the product in and out and they had to service they know how to service the customers. They know how to capture the customers' information. A new product comes in, call them on the phone, send them an email, tell them, our database has the ability to track by customer, are they buying a Joey, a Billy, our Bobby and when we get that new product in to be able to call that customer and say, "Hey, we have the latest product in."

Ronald Bookbinder - Global Hunter

Switching focus here; you have been talking about the factoring agents. There was an article on Women's Wear Daily that the factors are cutting off Barney's. What is your reaction to the factors as to how they are treating the majors and looking at your balance sheet, the accounts receivables and due for factors, if you could give us some color on the movement there?

Michael F. Buckely

Well as far as the majors go, we are not experiencing disruptions with the factor on orders from the majors. So that is their positive from our perspective. On the balance sheet that you see in earnings release, Ron, there is the balance due for the factors, you can see it is up in the neighborhood of $8.5 million over where it was a year ago but that is, remember I talked about how our sales rep over 50% of the majors and a lot of that papers with different factors.

So the receivable due for the factor, there is no recourse in that. We are going to get paid when the factor gets paid. If the factor does not collect in a set of time, then they will pay us money anyway. So that is one of the reasons we break that out to distinguish from the accounts that we have credit versus those that we do not and you can see that when we do a credit risk year-over-year, we actually brought that down by about 25%.

Ronald Bookbinder - Global Hunter

Yes, that looks very good. On the flow of store openings, how do you expect them to open up throughout the year?

Michael F. Buckely

Well we gave you the additional stores we are going to open this quarter. We mentioned we would open eight in the second quarter and then the balance is fair and equally split between the third and the fourth quarter.

Ronald Bookbinder - Global Hunter

Okay and have you shifted as to how many outlets you have for full price store? Was not it one for two to three stores and now it is one for three to four stores?

Michael F. Buckely

No, we are being consistent with what our models had been and at the end of the year; we ended with 32 full price and 10 outlet stores. By the end of this year, we will be within that range of three to four.

Jeffrey Lubell

Yes, we have been saying three to four through outlets pretty consistently.

Ronald Bookbinder - Global Hunter

Okay and lastly, Jones was talking about, I mean not Jones, Nordstrom was talking about lowering the initial mark up. Do you think that is going to pertain to you at all? I mean you obviously probably the best premium denim jean in their store and it is your premium denim is probably one of their best categories. Do you see that affecting you at all?

Michael F. Buckely

At the end of the day, we create suggested retail based on our wholesale price and a multiplier that gets to suggested retail. So we have no, our product is retailing well even with the Nordstrom. So we have not intentions, we do not think that they would have the need to have to lower prices or lower the mark up structure.

Operator

Your next question comes from the line of [Mimi Barteau - Chelsea Advisory Group].

Mimi Barteau - Chelsea Advisory Group

Just wondering if you could touch again on pricing, I know you mentioned that the 200+ was performing well from the department store perspective. I am wondering what you are seeing in the retail stores. In addition if you could just comment on some of the kind of higher pricing, the $300+, how those are doing as well?

Michael F. Buckely

Yes, I mean quite frankly the products that we invest in terms of more innovation be it super T, sequence, all the pieces of hardware, more that you can washes, we fairly do not see any resistance there. From a year ago, our average wholesale price is both in boutiques and majors are up a few dollars.

Mimi Barteau - Chelsea Advisory Group

And then in terms of the margin associated with some of those given the additional embellishment of the higher fashion?

Peter F. Collins

Yes, we work on the same margin whether it is one of our basic jeans or one of our most fashionable embellished jeans. So it is really a matter of whatever it cost to make that jean. We are going to mark that with the standard structure and that is how we get the retail price. But those jeans that have the more, as Jeff like to say more make in them that is what driving the brand. That is what goes refreshing and compelling for the consumers.

Mimi Barteau - Chelsea Advisory Group

Okay great and then just one last one, are you seeing anything in terms of concessions or rent declines with negotiations with malls and landlords in the current environment and if so, is any of that sort of included in the guidance?

Michael F. Buckely

Yes, I mean clearly we have seen much more, there are number of factors, one is we are getting into every one of the A centers that we want to get into. The second is that we are seeing better economic deals be it better rent deals, lower percentage rent, PI, there is a lot of flexibility out there and we have done better than most out there. So clearly we are on their radar in terms of wanting to bring us into their top centers.

Jeffrey Lubell

I think for 2009 as far as your question goes, I do not think that there is additional concessions that we can bake into this year that are not in the guidance.

Operator

You have a follow up question from the line of Todd Slater - Lazard Capital Markets.

Todd Slater - Lazard Capital Markets

Just on the fashion side, one of the things that we have been hearing in the premium market is that the basics are kind of dead but the jeans that have like you said the more make in them, more fashion are very strong and I am wondering what the, if you are seeing that reflected in your business as well, give us a sense of what percentage your mix you think is basic or solid that has less, let us say, detail or whatever you would consider to be sort of more basic and what percentage and what fashion size?

Jeffrey Lubell

Well pretty much everything in our jeans is anything but basic. Most of the other brands that we compete against are more five pocket type jeans similar to let us say a Levi Strauss 501 which is a quarter inch caballo type of construction. Most of our jeans are half inch single needle; actually it is a double needle fold construction. So they are a lot different. We have big T, we have super T, and we have many different things about our jeans. You can call them fashion but our core line which is a very novelty product is much more fashionable than our competitors.

So most everything in the line you could say in some way or another is fashion oriented because it is really not a basic even though it is a basic core item in our brand.

Todd Slater - Lazard Capital Markets

Okay, also the skinny is currently the best style. So, I am wondering, how much of your line is skinny versus let us say a wider width?

Jeffrey Lubell

In each group, you will find that there is five or six or seven different leg openings with each concept within each group and all the different leg openings are doing well. Bell bottoms are strong. Flares are still strong. Skinnies are strong. When I started back in 2003, I started with a skinny jean called the Johnny so it has been in line for five years now and we have added more skinny jeans like Julie and other products like that with flops, without flops and it is really not a trend that like you could say it is all skinny jeans. It is not. It is a mix shift across all the board. There are different customers, different walks of life. Some customers like bell bottoms. Some customers like skinny jeans.

Todd Slater - Lazard Capital Markets

That is great. Diversification is clearly a safer bet. Could you talk a little bit about how the performance of some of the licensing pieces specially footwear which is maybe the biggest one, how is that been trending over time?

Jeffrey Lubell

Well footwear is doing great. I designed the product and we approve everything with all our licenses. They cannot just go out with anything they want to run so to speak and the collection for fall looks amazing on both the men's and women's side and fragrance is really coming out really strong. I would see that ramping up a lot faster than the footwear. Hats are doing really well. We took outwear and bags in-house. We will find the wrap for the bag line. The bag line is doing well and my regular distribution international and domestic is selling the outerwear as well as some of the newer product that will bring forth to the market place which is getting great reaction.

Todd Slater - Lazard Capital Markets

That is good to hear. Okay just lastly, you have also heard from a lot of retailers so far that February has been from a trend or momentum perspective a little better month in traffic and sales than let us say the November, December, January period. I am wondering if you are seeing any improvement at all in that trend.

Michael F. Buckely

We think that we have actually within our own retail would be better in January. I think a lot of that has to do with the first five or seven days of January really to the continuation of holiday, a lot of people, I guess getting a gift card or getting money and going into both our full price and our outlets which really drove our January sales.

Operator

You have a follow up question from the line of Karen Short - FBR Capital Markets.

Karen Short - FBR Capital Markets

Just a follow up on your gross margins and US wholesale, can you just give a little color on what your, I did not catch this if you said it but what your guidance assumed in terms of the domestic wholesale gross margin and then Pete, can you just clarify, you gave your restrictive stock expense. Can you just clarify what you think the remaining component of corporate expenses will be? And then the last question is can you just give us an update on where commissions are for the boutiques and the department stores in the US?

Peter F. Collins

Okay the gross margins for the US wholesale business, what we said is that we are seeing more of that trends with larger portion of the sales coming from the majors and as you know we get the majors a volume discount so that does impact our gross margins. Now, we get a chunk of that back in the operating margin line because we pay lower commission on those sales than we do for the boutiques. So the comments that I made were focused on the operating margin line that make shift will have the potential diversity effect with the US wholesale business at that operating margin line because of that make shift. Overall, our production and our pricing are consistent with what we have done in the past so we, the kind of the core is we think is doing fine from larger perspective. It is really get back to the mix shift.

And I think that kind of covers also the sales commission, what is the other question on that?

Karen Short - FBR Capital Markets

Is there a change in the percent?

Peter F. Collins

No, we have not adjusted those and then on corporate, kind of similar to the comment I made for Eric, I think the best thing to do is look at the infrastructure that we had in the fourth quarter because for the most part that is where the cost of adding the expertise we brought into the Company last year. Most of those hires had started by the end of the third quarter so I think that fourth quarter run rate is pretty good one to work on.

Karen Short - FBR Capital Markets

Okay and then in terms of the actual income statements for the restricted stock still within 40% in the first quarter?

Peter F. Collins

No, the amounts, I cannot remember what my comments were but basically there could be a little decrease in the first quarter, Karen, but it is not significant. It is few hundred thousand dollars the most in the first quarter but for the year, it is going to be pretty consistent year-over-year.

Karen Short - FBR Capital Markets

A $200,000 decrease year-over-year.

Peter F. Collins

In Q1.

Karen Short - FBR Capital Markets

First quarter and then consistent.

Peter F. Collins

That is right.

Operator

Thank you, ladies and gentlemen, that does conclude the question-and-answer session. I would now like to turn the conference back to Mr. Jeff Lubell for any closing remarks. Please go ahead, sir.

Jeffrey Lubell

Thank you. Thank you again for joining us this afternoon. As always, we appreciate your continued support and interest in our Company. If anyone has any further questions, please do not hesitate to contact Pete or the team at ICR. This concludes our call today and thank you again for your attention.

Operator

Thank you, sir and ladies and gentlemen, this does conclude the True Religion Apparel Incorporated 2008 fourth quarter and fiscal year conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325 and enter pass code 3970327. Once again, if you would like to listen to a replay of today's conference please dial 303-590-3030 or 1-800-406-7325 and enter pass code 3970327. That does conclude our conference for today. Have a pleasant day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!