True Religion Apparel, Inc. (Nasdaq:TRLG) today announced financial results for the three and six months ended June 30, 2008.

Second Quarter Financial Results

• Net sales in the second quarter of 2008 were $64.2 million, an increase of 78.9% from $35.9 million in the prior year period. Net sales in the Company’s U.S. wholesale segment increased 57.3% to $38.4 million from $24.4 million in the prior year period. The Company’s international wholesale segment’s net sales increased 66.3% to $7.8 million from $4.7 million in the prior year period. Net sales for the consumer direct segment, which includes the Company’s branded retail stores and e-commerce site, increased 170.5% to $17.7 million from $6.5 million in the prior year period. The Company operated 30 branded stores as of June 30, 2008, compared to eight as of June 30, 2007. Net sales for the second quarter of 2008 included $0.3 million of licensing revenues.
• Gross profit in the second quarter of 2008 was $36.9 million, or 57.5% of net sales, compared to $20.5 million, or 57.3% of net sales, in the second quarter of 2007. The overall improvement in gross margin reflects the ongoing segment mix shift towards the Company’s higher margin consumer direct business, partially offset by higher in-bound freight costs on certain imported denim fabric and an increase in sales to major department stores, which receive a volume price discount.
• Selling, general and administrative (“SG&A”) expenses in the second quarter of 2008 increased 77.1% to $21.5 million from $12.1 million in the prior year period. SG&A expenses for the second quarter of 2008 included growth in consumer direct operating costs of $4.0 million and incremental pre-opening costs of $0.8 million. The Company’s second quarter 2008 SG&A expenses included $0.4 million related to projects that are expected to improve the Company’s production planning and forecasting ability and contribute to the growth of its international segment. The Company also incurred professional costs of $0.5 million, primarily related to the restatement of its previously released financial statements. The Company’s second quarter 2007 SG&A expenses included $1.2 million of severance and recruiting costs related to the replacements of two former executives.
• Operating income for the 2008 second quarter increased 83.0% to $15.4 million, or 24.0% of net sales, compared to $8.4 million, or 23.5% of net sales in the 2007 second quarter. In 2008, the combination of incremental pre-opening costs, production planning costs, international growth costs and restatement professional fees reduced the Company’s second quarter 2008 operating margin by 260 basis points.
• True Religion’s effective tax rate for the second quarter of 2008 was 41.1% compared to 44.0% for the second quarter of 2007.
• Net income for the 2008 second quarter was $9.3 million, or $0.39 per diluted share based on weighted average shares outstanding of 23.9 million, compared to $5.0 million, or $0.21 per diluted share based on weighted average shares outstanding of 24.0 million in the 2007 second quarter.

Year-to-Date Financial Results

• Net sales for the first half of 2008 were $117.6 million, an increase of 63.1% from $72.1 million in the prior year period. Net sales in the Company’s U.S. wholesale segment increased 43.2% to $70.9 million from $49.5 million in the prior year period. The Company’s international wholesale segment’s net sales increased 43.8% to $16.7 million from $11.6 million in the first half of 2007. Net sales for the consumer direct segment, which includes the Company’s branded retail stores and e-commerce site, increased 178.1% to $29.4 million from $10.6 million in the prior year period. Net sales for the first half of 2008 included $0.5 million of licensing revenues.
• Gross profit for the first half of 2008 was $67.4 million, or 57.3% of net sales, compared to $41.0 million, or 56.8% of net sales, in the second half of 2007. The overall improvement in gross margin reflects the ongoing segment net sales mix shift towards the Company’s higher margin consumer direct business, partially offset by higher in-bound freight costs on certain imported denim fabric and an increase in sales to major department stores, which receive a volume price discount.
• SG&A expenses for the first half of 2008 increased 70.8% to $40.6 million from $23.8 million in the first half of 2007. SG&A expenses for the first half of 2008 included growth in consumer direct operating costs of $6.9 million and incremental pre-opening costs of $1.0 million for the expansion of the company's consumer direct business, $1.2 million in incremental marketing expense related to the Company’s 2008 marketing campaign and $0.8 million in incremental professional fees primarily related to the restatement of the Company’s previously released financial statements. The Company’s SG&A expenses for the first half of 2007 included $2.4 million of severance and recruiting costs related to the replacements of two former executives.
• Operating income for the six months ended June 30, 2008 increased 55.7% to $26.7 million, or 22.7% of net sales, compared to $17.2 million, or 23.8% of net sales for the six months ended June 30, 2007.
• True Religion’s effective tax rate for the first half of 2008 was 41.1% compared to 44.0% for the first half of 2007.
• Net income for the six months ended June 30, 2008 was $16.2 million, or $0.67 per diluted share based on weighted average shares outstanding of 24.1 million, compared to $10.1 million, or $0.43 per diluted share based on weighted average shares outstanding of 23.9 million in the six-month period ended June 30, 2007.

“The second quarter of 2008 marks another quarter of record breaking revenue and earnings growth,” said Jeffrey Lubell, Chairman, Chief Executive Officer and Creative Director of True Religion Apparel, Inc. “During the second quarter, we experienced broad based sales momentum, with strong growth across each of our business segments. Net sales for the quarter increased 79% to $64.2 million from $35.9 million in the prior year period, highlighting the continued demand for our premium denim jeans collections and expanding sportswear assortment in both our retail and wholesale channels. We are especially pleased to deliver year-over-year earnings growth of 86% to $9.3 million from $5.0 million in the prior year period, while making several strategic investments in our infrastructure to position True Religion for future profitable growth.”

Store Openings

During the 2008 second quarter, True Religion opened 12 new stores, bringing its total store count as of the end of the second quarter to 30 stores. As of August 6, 2008, the Company has opened four new stores since the end of the second quarter, bringing the total store count to 34 stores. The Company is raising its targeted 2008 store count to 39 stores by year end 2008 compared to its previous targeted 2008 store count of at least 35 stores by year end 2008.

2008 Guidance

The Company is updating its guidance for the fiscal year ended December 31, 2008 as follows:

• Net sales are expected to be in the range of $242 million to $247 million (as compared to its previously updated guidance on May 8, 2008 of $220 million to $225 million), representing an anticipated net sales increase of 40% to 43% compared to 2007 net sales of $173 million.
• EPS is expected to be $1.61 to $1.65 (as compared to its previously updated guidance on May 8, 2008 of $1.52 to $1.56), representing an anticipated EPS increase of 39% to 42% compared to 2007 diluted EPS of $1.16.

The Company’s updated net sales and EPS guidance reflects the Company’s increased visibility into its wholesale forward order book through the third quarter of 2008 and the increase in its 2008 targeted store count from at least 35 stores at year end 2008 to 39 stores at year end 2008. The Company continues to anticipate an effective tax rate of 41.0% for the full year. The EPS guidance assumes fully diluted weighted average shares outstanding of approximately 24.1 million for 2008.

Mr. Lubell added, “Our strong financial performance in the first half of the year combined with our increased visibility into the second half of 2008 give us confidence in our ability to achieve our goals for 2008 and led us to raise our 2008 guidance for the second consecutive quarter.”

Investor Conference Call

True Religion management will host a conference call to discuss the financial results and answer questions today at 4:30 p.m. ET. The conference call will be available to all interested parties through a live webcast at www.truereligionbrandjeans.com and www.earnings.com. Please visit the Web site at least 15 minutes prior to the start of the call to register and download any necessary software. For those unable to listen to the live broadcast, the call will be archived for a year at both sites. A telephone replay of the call will be available for approximately one week following the conclusion of the call by dialing (800) 406-7325 (domestic) or (303) 590-3030 (international) and entering passcode: 3902934.

About True Religion Apparel, Inc.

True Religion Apparel, Inc. is a growing, design-based premium aspirational brand. The company designs, manufactures and markets True Religion Apparel products, including its premium True Religion Brand Jeans. Its expanding product line, which includes high quality distinctive styling and fit in denim, sportswear, and licensed products, may be found in premium department stores and boutiques in 50 countries around the world, including the United States, Canada, Germany, United Kingdom, Japan, Korea, France, Spain, Sweden, Greece, Italy, Mexico, Australia, South Africa and China. For more information, please visit www.truereligionbrandjeans.com.

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Among these forward looking statements are our 2008 Guidance, Segment Guidance, Store Opening Guidance and the other statements contained in this press release addressing our plans, expectations, future financial condition and results of operations. These forward-looking statements are not historical facts and are inherently uncertain and outside of our control.Any or all of our forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Actual future results may vary materially. Factors that may cause our plans, expectations, future financial condition and results to change are described in our Annual Report on Form 10-K, Reports of Form 10-Q and our other filings with the SEC, and include: the current downturn in the United States economy; the Company’s ability to predict fashion trends; the Company’s ability to continue to maintain its brand image and reputation; competition from companies with significantly greater resources than ours; and the Company’s ability to continue and control its expansion plans.