True Religion Apparel CEO Discusses Q3 2010 Results - Earnings Call Transcript

Nov. 4.10 | About: True Religion (TRLG)

Call Start: 16:30

Call End: 17:08

True Religion Apparel Inc. (NASDAQ:TRLG)

Q3 2010 Earnings Conference Call

November 3, 2010 4:30pm ET

Executives

Anne Rakunas – ICR

Jeff Lubell – Chairman of the Board

Mike Egeck – President

Pete Collins – Chief Financial Officer

Lynne Koplin – Chief Operation Officer

Analysts

Eric Beder – Brean Murray

Todd Slater – Lazzard Capital Markets.

Steven Gregory - Mandalay Research

Christine Chen - Needham & Company

Dorothy Lakner - Caris & Company

Presentation

Operator

Greetings and welcome to the True Religion Apparel Inc., 2010 Third Quarter Earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne Rakunas of ICR. Thank you, you may begin.

Anne Rakunas

Thank you, operator. Good afternoon everyone and thank you for joining us today to discuss True Religion Apparel 3Q 2010 Financial Results. By now, everyone should have access to the earnings release which went out today at approximately 4:00pm ET. If you did not receive the release, it is available on the investors-relations portion of True Religion's website at Truereligionbrandjeans.com by clicking on the "Investor Relations" tab.

Results are posted on the site – a detailed management commentary of our results for the third quarter in year to date. The call is being webcast and a replay will be available and archived in the company's website. Take note that all of the information discussed on the call today s covered under the Safe Harbor provision of the provision of the Private Securities Litigation Act.

We caution listeners that during this call, True Religion management will be providing financial guidance, and making other forward-looking statements regarding future financial results and business opportunities. The company's actual future results may be very different from our current expectation.

We encourage you to read the 2009 10-K, the upcoming 2010 3Q 10-Q, and other reports that we follow 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, it is my pleasure to turn the call over to True Religion Apparel chairman, chief executive officer, and chief merchant, Jeff Lubell.

Jeff Lubell

Thank you, Anne, and good afternoon everyone. Thank you for joining us today as we discuss our financial results for the third quarter of 2010. Speaking on the call with me today are Mike Egeck our President, and Pete Collins our Chief Financial Officer, Lynn Koplin our Chief Operation Officer who also participates during the question and answer portion of today's call.

The third quarter included some challenges for us as we experienced a mixed performance among our business segments. Overall, we did not accomplish the financial results we had expected in the quarter, but we continue to execute our plan and feel good about the initiatives we are working on.

The stand out performer in the third quarter was, again, our consumer direct segment where we achieved sales growth of 42% including same-store sales increase of 9%. International-segment sales were up 9% despite our decision to terminate certain non-exclusive distributors in preparation for taking some key markets direct. The wholesale business in certain international markets was soft, however, our newly-opened stores in Tokyo, London, and Cologne were well received. We look forward to continued expansion of our retail model in International markets.

The domestic wholesale business was a challenge in the third quarter overall. The segment's net sales decreased and our women's business with the major department stores was particularly soft. Mike will discuss later our plan to improve this business.

While we are reducing our outlook for 2010 – which Pete will discuss in a minute – we continue to focus on using our success in the U.S. consumer-direct segment to elevate our business across all channels and regions. I'm very with contributions made by our key new hires in 2010. Our bench has more skill, and we have more teamwork than in the past.

With that, I would like to turn the call over to Pete to review the key financial highlight from the quarter. Pete.

Pete Collins

Thanks, Jeff. Good afternoon, everyone. I’ll review highlights and also discuss our updated guidance for the year.

As noted in the press release, additional details on the quarter's financial results can be found in our financial review document posted on our IR website under "Management's Quarterly Commentary on 3Q 2010 Results."

This is a new practice for us, and we intend to continue it going forward by posting on our corporate website a similar report each day we post our earnings release.

Our third quarter net sales increase 12.5% to $92.8 million, and our consumer-direct segment continue to drive our top-line growth. Same-store sales, which included sixty-three, they were up for at least twelve months, increased 9.0%. Overall net sales in the consumer-direct segment increased by 42%. This continues to be our largest segment at about 50% of our total net sales.

We opened eight domestic stores in the quarter and finished with eighty-nine domestic stores versus sixty-six stores a year ago.

(Year’s) wholesale sales for the quarter declined by 15.6% to $26.9 million. Our specialty channel achieved increased net sales for the second consecutive quarter. The sales to the major department stores decreased more than we anticipated.

We have been impacted by the overall negative sales trend in women's premium denim at the major department stores. We also reduced our sales to our (priced) customers which is consistent with our strategy to maintain our brand's premium position.

International sales rose 9% as our newly-formed joint venture helped to increase our sales in the EMEA. Overall, the international segment's net sales increase was less than we expected due to our decision to terminate some non-exclusive distributors as we take a more direct role in positioning our brand. In the quarter, we cancelled orders of approximately $2 million from these terminated distributors.

Third quarter operating income decreased $4.3 million from $22.7 million in 2009 to $18.4 million in 2010. U.S. consumer-direct increased the property income by $3.7 million or 33% thanks to the results at new stores and the same-store sales increase.

Also, corporate overhead was reduced by $1.2 million in 2010 compared to last year primarily because our performance-based compensation decreased.

The results in the U.S. wholesale in the international segments was less than expected due to the net sale shortfalls previously discussed and the increased investments for the international segment.

Turning to our balance sheet, since the beginning of this year, we have increased our cash and cash equivalent by $22.2 million and ended the quarter with a balance of $127.7 million. Our accounts receivable balance decreased slightly from the beginning of the year as we maintained our credit policies.

Our inventory balance increased 36.3% from the end of the third quarter 2009. Three quarters of this increase is in our U.S. consumer-direct segment which increased its total square feet by 36% in that period and is on a positive same-store sales trend for four consecutive quarters.

The remaining inventory increase is related to our international segment including the purchase and inventory for our new joint-venture in Germany. Our store opening schedule remains on track, and we expect to open six additional stores in the fourth quarter including our full-priced stores that open in October at the Yorkdale Shopping Center in Toronto, Canada, and at The Forum Shop at Caesar's in Las Vegas.

In light of our business performance in the third quarter, we're revising our full-year guidance downward. We now expect our net sales for the fiscal year 2010 to be between 355 million and $260 million – a 14% to 16% over 2009 net sales, and diluted earning per share to be in the range of a $1.73 to $1.78 per share.

This guidance takes in to account our 2010 fourth quarter, full-priced, wholesale sales order book which declined 23.8% as of September 30, 2010 as compared to September 30, 2009.

Now, I'll turn the call over to Mike Egeck. Mike.

Mike Egeck

Thanks, Pete. I just want to spend a few minutes touching on some key points and initiative in each of our business segments. We'll start with wholesale.

There are three different dynamics going on in our U.S. wholesale business. First our specialty channel business continues to be positive. We feel this is particularly encouraging as the specialty channels where denim tape-maker shot. Historically, the channel has been a good, leading indicator of brand momentum.

Second, we continue to reduce sale to the off-price channel to maintain the brand's premium positioning. This is important for the long-term health of the brand, and we continue to execute the strategy we laid out at the beginning of the year.

Third, the U.S. wholesale business with the major department stores remains challenging. The premium denim category overall in this segment remains soft. While we believe we are gaining share in men's, our women's business is difficult.

The performance of the brand with the U.S. major department stores is in stark contrast to the strong positive comps we experience in our own stores. One of our goals is to leverage data from our own stores to more actively partner with our department store account and improve sell-through.

On that note, we recently welcome a new VP of the U.S. wholesale sales with a strong experience of directly managing floor space with other premium denim brand. We find that a few more key people in this team to help us manage this initiative.

We'll take more control of the merchandise buys and the on-hand content, and more (fill-in) styles, washes, and size assortment similar to how we execute in our own stores. This program will begin in the Spring of 2011.

On the international front, we are making excellent progress in establishing a regional headquarters in Switzerland to oversee our direct investment in the Europe, Middle East, and Africa region. We have recruited two very experienced business leaders and they are quickly setting up the operational infrastructure to execute with our wholesale and retail growth plans in the region.

We currently have good sales in some key EMEA markets such us Germany and the U.K. We have little presence in other key markets such as Italy, France, and Spain. Establishing experienced business leaders in the market is the first step to increasing our sales and earnings in this region.

With regard to on going investments, we expect to incur approximately $400 thousand of cost in the fourth quarter on top of the $200 thousand we incurred in the third quarter as we lay the foundation for our direct business in the EMEA.

In February we plan to share in detail our go-forward business model for our international segment.

Finally, our U.S. consumer-direct business – which is our largest business segment which continues to deliver very strong results. To continue to drive the business we are expanding our use of key performance indicators to influence our operations. We are very pleased that in the first nine months of the year, we have made strong improvements in sales per square foot conversion in UPT.

Our strong performance in managing these key metrics have allowed us to grow year to date same-store sales by nearly 11% despite reduction in average and in retail and in traffic drive by the overall weakness in consumer spending.

One area that we have targeted for additional improvement is merchandise planning and allocation, which is a key component of maintaining a very profitable business model with an expanding doorbase.

As part of this process, we conduct an in-depth evaluation of retail merchandising systems in the third quarter and now expect to move forward and implement new planning, buying, and allocation systems over the next several quarters.

Overall, we are focused on continuing to prove our execution and on quickly evolving this company from a business with a great brand and great product to a business that also includes a world-class, global, business model.

A few near-term initiatives we are working on. First, we are organizing our infrastructure to clearly support our business. This means developing a core services business unit which will include design, production, distribution, and brand marketing, and administration. Our goal will be to gain leverage on these services as we grow.

We're also making sure that we have the right people with the right experience and skillset to support out growth. We expect to update our business segments in the near future to reflect this change.

Next, we are developing a five-year business plan with our executive and management team. The five-year plan will allow us to focus and invest in initiative that will drive our business and both the short and the long term.

Finally, in regard to marketing, we expect to invest more in brand marketing overall and more in the science of brand marketing in particular. We have a specific plan to learn more about where our opportunities are from both the customer and merchandise perspective, and we'll use that knowledge to implement activities to target those opportunities.

This is a very dynamic time for True Religion Brand Jeans. Although we are disappointed with our progress in the quarter, the business is healthy and poised to make progress on many fronts including product, global distribution, and brand evolution.

We understand the decisions we make today will have an impact for years to come. We're being thoughtful and diligent about our strategy and investments, but we're also moving quickly forward in all facets of the business.

I would like to ask the operator to open the call for questions. Operator.

Question-and-Answer session

Operator

Thank you. We will now be conducting a question and answer session. (Operator instructions)

One moment please while we poll for questions.

Our first question is from the line of Eric Beder with Brean Murray. Please go ahead with your question.

Eric Beder – Brean Murray

Good afternoon, guys.

Phil Collins

Good afternoon.

Eric Beder – Brean Murray

When you look at the international and other pieces, where do you think is the biggest opportunities in international? I guess, another question is, you have a significant amount of cash, you've done a great job holding on the inventory. What is your thought process for the use of cash going forward in terms of potential (inaudible) or buy backs, or other (inaudible)

Pete Collins

Let me start with the buy back. As we talked before, we evaluated our capital resources and just recently, again, with our board of directors, we really believe that in the best interest of the shareholders is to continue to invest in the business specially, as you just mentioned, our international expansion. So, there's no intention to pursue a share buy back at this time.

For an international development perspective, let me pump that over to Mike and he can share some insight with you there.

Mike Egeck

Yeah, hi Eric. As you know, international overall is less than 20% of our total business, but we consider that we have a lot of opportunities around the globe. Right now, we're really focused in particular on the EMEA. As we said in our comments we got a good business in Germany and the U.K. and (inaudible) but we're very underdeveloped in France, Italy, Spain, and other countries in the region. So, for right now with the build up of our regional office in Switzerland, that's where our emphasis are for international growth.

Eric Beder – Brean Murray

Okay. When you look forward to France for some of the fashion trend in there, you’ve had, in some respect, the very basic fashion trend. Do you think that trend is slowing down and might come back to some of these traditional, for instance the company in terms of (inaudible) and some of the very highly fashionable items?

Lynne Koplin

Yeah. I mean, from a fashion trend stand point for Spring, basically, we're seeing a lot of silhouette differentiation. It's moving pretty drastically in to a trouser silhouette which we are very much on track with. We represented that in a fairly major way in our spring line.

We are seeing a return to embellishment which is already registering for holidays. It's probably one of our sell-throughs right now at retail. We're going in to a lot lighter weight fabrication. There's a lot of color impact especially in non-denim fabrication.

So, if you see the women’s business evolve in to Spring, you're going to see a lot of new trend-based items from us that I think will be very competitive.

Eric Beder – Brean Murray

Great. Thank you, and good luck.

Pete Collins

Thanks, Eric.

Operator

The next question is from Todd Slater with Lazzard Capital Markets. Please go ahead with your question.

Todd Slater – Lazzard Capital Markets

Thanks very much. Can you guys tell us – and maybe if I missed it, I apologize – the third quarter comp that was up nine, which is a great number, what was that up against from last year? My impression is it was down about eight or nine, but I don't know if we have that number. Maybe provide us some insight into how we should be looking at the fourth quarter which is up against a 22% comp. I understand that last year's comp base was 42 stores or so. So, a little bit potentially deceiving. So, just wondering… My first question is how we should be looking at that, what the trend has been on a two-year basis, and how you're numbers deal with that in the fourth quarter?

Pete Collins

From an overall perspective, remember last year in the first three quarters, we really just shared information about those fifteen stores that were open throughout all of 2008 when we were discussing comp. What we said last year, basically each quarter of those first three, we were on plan, and the plan was to be down 10% year over year in these fifteen stores.

Now, from an overall perspective, the performance was better than that, but we didn't share that information overall because the store base was still relative small. Once we got to the fourth quarter though we did feel that we had a large enough base of stores – over forty. So, we did comment on what those stores increase was on a year over year basis which is the figure, you're right in remembering, was 22%.

So, that being said, with that sixty-three stores that are in the comp base now and posting that there's 9% in the quarter. That was ahead of what our expectations were. I think we've shared with you in the past, we built our plan this year on a quarterly basis assuming that the first half of the year would be the easiest year over year comparison and recognizing that we'll be going up against this fourth quarter – basically the best performance figure last year when we got to the fourth quarter this year.

So, our expectation is that the plan assumes a lower comp rate for the fourth quarter than what we had planned for the first half of the year, first three quarters of the year really.

Todd Slater – Lazzard Capital Markets

So does -- I guess a couple things. First of all, have you fully cycled, do you think, the deflation from last year in the fourth quarter? We get back to a sort of fairly flat AUR. Can you talk about where you are on the inflation to flationary front? Are you saying your fourth quarter guidance assumes a positive but less positive comp against the 22%.

Pete Collins

Yeah. We're assuming a positive comp in the fourth quarter. We assumed a positive comp for every quarter of this year. It's just a lower assumed comp based on the fact that Q4 last year was the best quarter of the year. As far as AURs go, we're continuing to see AURs come down because of the shift, again, towards clean launches. One of the things that you also saw in the management commentary that's on the website is that the average unit per transaction is trending up and our average selling price is trending down – that’s the function of an increase in our sportswear sales. The sportswear was 26% a year ago with the improvements we're making in the merchandise both from just the design perspective as well as the merchandising, we're up to 30% now in the quarter versus, like I said 26% last year.

So, there are some real, positive things that we're seeing in our retails stores. Again, we are able to better manage the flow of merchandising to those stores. It really serves the customer in a better way.

Todd Slater – Lazzard Capital Markets

The AUR has been down, that's looking back -- looking in the rearview mirror. In the fourth quarter, do you expect that to still be the case and is it solely because of the sportswear mix? What is the AUR on the denim piece, on the other 70%?

Pete Collins

On the jeans perspective, it'll be pretty flat year over year. We aren’t really expecting that much of an impact on jeans. Then, as sportswear takes on a larger portion of the sales, the overall AUR would come down.

Todd Slater – Lazzard Capital Markets

Okay. So, even against the 22% comp, and the mix, and the AUR down on mix, you still assume a positive fourth quarter comp? I just want to make sure I am clear on that.

Pete Collins

You got it.

Todd Slater – Lazzard Capital Markets

Okay.

Pete Collins

The bottom line there is also conversion. The conversion rate continues to rise as we have for about eight to ten consecutive quarters. The improvements in merchandise mix, and the improved selling skills in our stores are delivering an improvement in conversion rate.

Todd Slater – Lazzard Capital Markets

Terrific. Okay, that's great news. Then in the new relationships or evolving relationships with department stores getting more floor space, what is that an -- what are you giving up in exchange for that increase in floor space?

Mike Egeck

Todd, this is Mike Egeck. I'll take that one. As you partner with stores on that, there's an expectation to achieve a shared goal around gross margin and inventory target. That's what we're looking to do tin these partnerships.

Todd Slater – Lazzard Capital Markets

Okay. That makes sense. Lastly, I'm trying to reconcile the decrease – you had a decrease to the off-price channel. I know you've been telegraphing about $10 million. Where are we in that scenario? Was sales of the off-price channel down in the third quarter and should that not have been a positive for gross margins? Maybe you could outline on 260 basis point declining gross margins, sort of, what that was, what drove those, what were the big buckets within that decline? Thanks.

Pete Collins

As far as the gross margin cost, actually what we found was that we had some aged, excess inventory, and we chose to move that in to the off-price channel in the quarter. It was aged and excess and that needed a steeper discount than what we used in the past. So, that actually was a drag on the margin in that channel in the quarter.

The other thing is that it impact on the gross margin in the U.S. wholesale in the quarter was, on certain women's styles, we brought down the initial mark-up in order to meet competitor or market price pressure. So, it's really a combination of those things that drove the reduction in gross margin in the U.S. wholesale in the quarter.

From a sales perspective, just purely to the off-price channel, we're basically in line with our plans for the year to bring that down by about $10 million on a year over year basis. We continue to try to make sure that we're positioning our brand as a premium brand for the long term and continue to believe that it's best for us to reduce our presence in that channel.

Todd Slater – Lazzard Capital Markets

Is that activity done, or do you still want to continue to move some out of that channel for 2011?

Phil Collins

We would expect that… We haven't finalized our plans yet for 2011, but as we've set before, we would expect to take another step down next year, probably in the neighborhood of $5 million at least for next year.

Todd Slater – Lazzard Capital Markets

Terrific. Thank you very much and good luck in the quarter.

Phil Collins

Thanks, Todd.

Operator

The next question is from Eric Tracy with FBR Capital Markets. Please go ahead with your question.

Steven Gregory - Mandalay Research

This is actually Steven Gregory with Mandalay Research. A couple of things. Obviously it was a very challenging quarter this year. Now the question regarding the Wall Street Journal a couple of months ago, there was an article written about how in 2011 companies are going to try to drive more revenue through e-commerce to improve their margins at a much higher rate. Can you provide some color on the call today, what is your e-commerce vision going forward? How are you planning to get there and what are you trying to do to solve -- get more customers to your site, have a better buying experience and gain more revenue and market power?

Jeff Lubell

Hi Steven. You know what? Our e-commerce business is an important component of our overall U.S. consumer-direct business. As we continue to invest in our retail store footprint, it's been decreasing as a percentage of the overall sales mix. We do view that way to really market our e-commerce is a good way to market our brand, our merchandise to consumers. We know that many of them evaluate their fashion by online before they go to stores. In a scenario that... Mike talked about making some improvements from a marketing perspective is a key component of that go-forward plan for us. That's really the way that we look at e-commerce overall at this point.

Mike Egeck

If I might add, we don't break e-commerce out separately, but we do benchmark our performance there against our peer group, and we're quite comfortable to know that we are performing at least as well as our peers.

Operator

The next question is from Christine Chen with Needham & Company. Please go ahead with your question.

Christine Chen - Needham & Company

Thank you. I wanted to switch gears and talk about international for a little bit. You mentioned that you decided to terminate some nonexclusive distributors. Was that something that you were considering when you guys last reported, and how much did that negatively impact your international business in the third quarter? I think last time you talked about your Germany JV, you mentioned that there would be some timing shift out of third quarter into the fourth quarter because of recognition. How much did that also take away from the third quarter?

Mike Egeck

Christine, this is Mike. I'll talk about the international to begin with. The distributor situation has to do with distributors primarily in Asia Pacific and it's in an evolving situation. I think when we evaluate the market there the original business model which consisted of multiple, non-exclusive distributors has proven difficult to manage from my standpoint. It’s a creative way to, maybe, consider excess distribution and some problems with potential diverting of product. So, as we look at that situation, we decided, in the best interest of our brand and our business to terminate some of those relationships.

It took $2 million out of the quarter and international sales.

Christine Chen - Needham & Company

Then what about the shift in timing for the joint venture in Germany? Because last time you had mentioned because of the revenue recognition that there would be some sale that would have historically been third quarter but they wouldn't get recognized until fourth quarter?

Pete Collins

From a plan perspective, you’re right. Basically, what we saw was very little wholesale of sales being done from us to Germany in the month of July as we prepare to buy the assets there, and finalize the joint-venture at the end of July, and to have a kick-off t the beginning of August. So, that did reduce the wholesale sales in the quarter. As we said before, we’re expecting to see that come back to us in the fourth quarter.

One of the things that we talked about in the management comments that are on the website is that we saw a impact from the gross margin perspective that worked out to be roughly about ninety basis overall in our consolidated margin for the quarter. That worked out to be roughly $900 thousand of gross margin impact in the quarter with the sell through of merchandise that we acquired from our distributor. That’s behind us now and we’re expecting the margins to normalize when we get in to the fourth quarter.

Christine Chen - Needham & Company

Then just on the subject of margins, to piggyback off the last question, where did that excess, aged inventory come from? Was it coming from the retail channel or was it coming from the wholesale channel?

Pete Collins

It was, basically, here in the warehouse. The inventory that makes it’s way in to the stores is going to go from a full-price to an outlet store to get cleared. It would be very unusual for us to make a return trip here, then go to an off-price account. So, it was a combination of merchandise that was here. Some of it was, maybe, earmarks the retail stores, but a lot of it had been purchased for the wholesale account.

One of the improvements that we’re making around here is to just be more thorough and really seek to be more efficient in our business. Through some of those efforts, we identify some inventory that really was age in excess that need to be moved. That’s what you saw in some of those channels in this quarter.

Christine Chen - Needham & Company

I am sorry, my last question. You talked about reduced IMU on women's jeans, how much of that was from sourcing pressures versus the actual competitive environment, and are you seeing sourcing pressure on cotton going forward?

Pete Collins

The impact that we had so far was really more a strategic choice that we made to match competitive prices or market price. It was not geared towards pressure from a input perspective. We feel good about our input – the stability of our input cost – heading in to the first half of next year, but we recognize that we’re expecting some pressure especially in denim prices as we move in to the back half of next year. We’re going to be taking steps to see what we can do to try to minimize the impact of that. Again, it’s really more of the second half of 2011 issue at this point.

Christine Chen - Needham & Company

Okay. Thank you and good luck.

Pete Collins

Thanks, Christine.

Operator

The next question is from Dorothy Lakner with Caris & Company. Please go ahead with your question.

Dorothy Lakner - Caris & Company

Hello, thanks. Good afternoon everyone.

Pete Collins

Hi, Dorothy.

Dorothy Lakner - Caris & Company

Just going back to the wholesale business for a second. Could you give us a little bit more color on the strength that you are seeing on the boutique side of the business, because, obviously that has been a positive part of that story. Then, looking at the majors and the challenges that you faced there, and I think what Lynne had said about the styling changes that you are seeing for spring, are we starting to see some of that already in some of the assortments that I am seeing in department stores, for example? It seems like, as I've walked around, there is more variety and style in your assortments, at least in certain of the department stores. It seems like we are seeing some higher price points that went away for awhile. So, I am wondering if that is already beginning to happen as we speak? Then, just -- if you could compare what you are doing right in your own stores and where the majors are falling flat, I guess, to put it a little bluntly. Then, lastly, if you could give us any more color on the new hires that you've made on the international side of the business? Thanks.

Lynne Koplin

On the product side, we are definitely seeing a little bit of a shift towards the direction that we’re taking as we go in to next year. You’re seeing some more product diversification in the stores right now. Our major accounts are really open to try a more diverse approach to our department. So, you’ll see a ponte or a corduroy, it’s definitely not a exclusive denim assortment on the floor. That seems to be working. Also, it’s a natural evolution to come out of Spring-Summer and go in to a higher averaging at retail. So, you’re definitely seeing was the trend towards embellishment working for us. That is driving the pricepoint up to that $250 that’s working again for us.

On a specialty side, you have a lot of flexibility – specialty stores are just very close to their customer. I mean, really, really respond to what the customer is responding to very quickly. So, because of our inhouse sales team and a lot better coverage in terms of getting out and being in the field, looking for new accounts, etcetera, we’re just getting a lot quicker reaction to new product ideas on a specialty store side. So, that’s working much more favorably for us right now. It’s happening definitely in both men’s and women’s. So, it’s working with us right now.

Dorothy Lakner - Caris & Company

Okay, great.

Mike Egeck

In terms of difference between our own stores and major department stores, obviously we have a very service-oriented environment, and a very branded environment with the biggest assortment of products that you can find anywhere at retail. So, customers are naturally drawn to that environment. I will say the a premium denim category consolidates, we do believe it’s consolidating, there’ll be a limited number of brands that rise up within that category. I think at that point, with the help of the major department stores account, it will become more of a branded space, most like the evolution you’ve seen in the contemporary women’s space. So, we’re well prepared for that with our new business model and with our ability to assist stores in fixturing, and signage, and POP.

Dorothy Lakner - Caris & Company

Is that something that we could see near-term, perhaps in the spring, or is that something that is just going to just take time to build with your partners in the department stores?

Mike Egeck

Obviously, it’ll take some time to build, but we’ll start working on it in Spring 2011 and evolve it from there.

Dorothy Lakner - Caris & Company

Great.

Mike Egeck

Final part of your question was new hires in international. We have made two key hires (inaudible) joining us to be managing director of the EMEA. He’ll be headquartered in Lugano, Switzerland, and Julian Groves who was formerly the country manager of U.K. for Guess has joined us as general manager of the region. He’ll be headquartered working out of London.

Dorothy Lakner - Caris & Company

Great. Thanks.

Mike Egeck

Thanks, Dorothy.

Operator

(Operator instructions). I have no further questions on queue, I’d like to turn the call back over to management for closing remarks.

Thank you for your time today. We greatly appreciate your continuous support and interest in True Religion Apparel. As always, should you have any follow up questions, please do not hesitate to contact Pete Collins our ICR.

Operator

This concludes today’s teleconference. You may disconnect your lines. Thank you for your participation.

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!