TRLG: Growing Top Line Numbers in a Weak Environment
Submitted By Knobias ClipReport
Monday’s session saw oil spike to set a new all time high and begin a small consolidation throughout the day which caused the last day of the second quarter to turn surprisingly green. Even so, the first half of 2008 came to a thankful end with oil, financial, and economic worries highlighting the period.
With the end of the second quarter, window dressing was the name of the game with the best names being scooped up while dumping the anything that’s not in the hip sectors. Predictably, financials were the loser on that end. While biotechnologies, oil services, gold and silver, and the semiconductor sector saw increases, financials were led down along with retail and anything auto related.
With the market continuing to be weak, one would think defensive names would be the way to play the downturn, but many of the main defensive names are seeing the slowdown spill to their areas as well. One of the only areas to thwart the slowdown was the utility sector which has seen increased action lately on their ability to pass through rising commodity costs.
Another way to play the market would be to grab names with increasing top lines. Small caps have outperformed large caps recently indicated by the divergence in the Dow and the S&P. With small caps, investors can play growth that may be insulated from broader market slowdowns. One of those names could be True Religion Apparel, Inc. (TRLG).
The Company designs, markets, distributes, and sells apparel to fashion-conscious consumers on six continents, including North and South America, Asia, Africa, Europe and Australia. Some investor might worry about the prices of the Company’s products. With $300 jeans and $50 t-shirts, the Company’s offerings definitely enjoy large margins. But even with the high price, the Company has also enjoyed some fairly large growth over the past few years.
In fiscal year 2003, the Company sported $2.36 million in sales. They’ve since grown that number to over $173 million in the 2007 fiscal year and have guided to sales of $220-$225 million for 2008.
In the Company’s first quarter earnings release, Jeffrey Lubell, chairman and chief executive officer of True Religion Apparel said, “The first quarter of 2008 marked a continuation of the strong growth True Religion delivered in the second half of 2007. We achieved year over year revenue growth of 47% thanks to the positive customer response to our spring 2008 collection. Our first quarter results reflect the continued execution within each of our major growth platforms, as we exceeded our internal expectations of our U.S. wholesale business, improved our international performance, and continued to provide our customers with an expanding assortment of sportswear product offerings to complement our core premium denim jean collections. We are confident that we are moving in the right direction to establish True Religion as a truly global, aspirational brand.”
While $300 dollar jeans in a down market may not be the typical investment for some, the results do not lie. With that in mind, investors would be wise to follow the name over coming weeks with second quarter earnings expected to be reported on July 8th. Investors would be wise to watch.
