True Religion 3rd-quarter net income edges up

VERNON, Calif. (AP) -- Clothing company True Religion Inc. said Monday its third quarter net income rose ahead of expectations, helped by its wholesale business.

The company, which is exploring strategic options, including putting itself up for sale, said net income for the three months ended Sept. 30 rose 2 percent to $12.3 million, or 49 cents per share. That compares with $12.1 million, or 48 cents per share, last year. Analysts, on average, expected 45 cents per share, according to FactSet.

True Religion makes premium jeans that retail for around $200, and other clothing. Revenue rose 9 percent to $118.5 million from $108.4 million a year ago. Analysts expected $113.2 million.

Revenue in stores open at least one year fell 4.7 percent. The measure is a key gauge of a retailer's financial health because it excludes stores that open or close during the year.

Net sales for its U.S. wholesale segment, which means clothing sold via stores not owned by True Religion, rose 35 percent to $29.8 million. Sales at off-price and specialty stores drove the increase.

International revenue fell 3 percent to 22.7 million, hurt by a slowdown in Korea and Germany.

The company now expects net income or the year of $1.80 to $1.86 per share, on revenue of $458 million to $463 million. Previously it had forecast revenue of $450 million to $455 million.

Analysts, on average, expect $1.83 per share, with estimates ranging from $1.82 to $1.86. Wall Street's average revenue projection is $453.3 million, with estimates ranging from $446.3 million to $456.2 million.

For the fourth quarter, True Religion expects net income of 52 cents to 58 cents per share, on revenue of $128 million to $133 million. Analysts, on average, expect net income of 58 cents per share on revenue of $128 million.

Susan Anderson, an analyst with Citi Investment Research, saw reason to be concerned in the decline in sales at stores open at least a year and the weakening of the company's U.S. retail business. She noted it was the first time that figure had turned negative since the company began reporting it in the fourth quarter of 2009.

"Additionally, while wholesale sales were up significantly, a primary driver of the increase was lower margin off-price sales," Anderson wrote in a note to clients. "We continue to be concerned about slowing U.S. sales, which has been driving earnings per share, and topline/profitability issues in international." She kept a "Neutral" rating on the stock, with a $27 price target.

True Religion shares fell 95 cents, or 3.6 percent, to $25.61 during morning trading. The stock started the session down 23 percent so far this year.