True Religion Apparel: Keeping the faith

Worship at the alter of denim: True Religion Apparel, Inc. (Nasdaq:TRLG) is the true religion for jean wearers and investors alike, churning out stellar top and bottom-lines around a brand that has garnered considerable clout in only five years.

True Religion’s fit, look and feel of lived-in jeans is what has created a competitive advantage for the jean manufacturer in a saturated market and pushed it to the designer-brand level. The jeans, which are sold through stand-alone stores and high-end department stores such as Saks 5th Avenue and Neiman Marcus, range from $170 to $350 per pair.

Given the success True Religion has had, it’s branching out into other clothing offerings, such as jackets, shorts, cargo pants, tops and shirts in other non-denim fabrics such as corduroy and twill. The retailer is also expanding into colored denim this year, and last year the patented its “super big-T stitch,” a distinctive thread stitch that characterized its best-selling products in 2007.

While almost every other retailer continues to languish in the murky macro environment characterized by crippled consumer spending, True Religion is devoutly hitting quarter after quarter out of the ball park.

For the second quarter ended June 30, 2008, net sales for the consumer direct segment, the company’s bread and butter, surged 170.5% to $17.7 million from $6.5 million in the prior year period. A segment mix shift toward the company’s higher margin consumer direct business has certainly helped buoy results.

While most other retailers have had to close stores to make ends meet, True Religion opened 12 new stores in the quarter.

Both revenues and earnings bested the consensus on Wall Street. Revenues soared 79% to $64.2 million from $35.9 million in the same quarter last year. Net income surged 86% to $9.3 million, or $0.39 per share, compared with profit of nearly $5 million, or $0.21 per share, for the second quarter in 2007. Analysts were expecting earnings of $0.32 per share on sales of nearly $50.2 million.

International revenues picked up steam, soaring 66.3% in the quarter.

What remains impressive about True Religion is that its jeans will likely remain the “it” pairs for the remainder of the fiscal year on account of management’s . . .

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