On May 8, upscale denim designer True Religion Apparel (NASDAQ:TRLG) released first-quarter earnings for the period ended March 31.
- Lukewarm sales growth and lower earnings usually don't add up to a 12% stock price spike. So what's going on here?
- True Religion is becoming a very different company than it was a year ago, and it's starting to show in the numbers. Last year, all of that stylish denim was sold through partners like Urban Outfitters (NASDAQ:URBN) and Nordstrom (NYSE:JWN), but the fledgling True Religion retail chain contributed $4.1 million to sales this time. That's up from virtually nothing last year, or even last quarter.
- That transformation is making its mark on the cash conversion metrics in a big way, and explains the massive increase in capital expenditures as the company rolls out new storefronts.
(Figures in thousands, except per-share data)
Income Statement Highlights
|
Q1 2007 |
Q1 2006 |
Change | |
|---|---|---|---|
|
Sales |
$36,149 |
$35,609 |
1.5% |
|
Net Profit |
$4,183 |
$6,471 |
(35.4%) |
|
EPS |
$0.18 |
$0.28 |
(35.7%) |
|
Diluted Shares |
23,584 |
23,432 |
0.6% |
Get back to basics with the income statement.
Margin Checkup
|
Q1 2007 |
Q1 2006 |
Change* | |
|---|---|---|---|
|
Gross Margin |
56.3% |
52.7% |
3.6 |
|
Operating Margin |
18.5% |
29.7% |
(11.2) |
|
Net Margin |
11.6% |
18.2% |
(6.6) |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
Q1 2007 |
Q1 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$48,574 |
$21,224 |
128.9% |
|
Accounts Rec. |
$5,770 |
$18,804 |
(69.3%) |
|
Inventory |
$8,757 |
$11,290 |
(22.4%) |
|
Liabilities |
Q1 2007 |
Q1 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$10,113 |
$4,570 |
121.3% |
|
Long-Term Debt |
$0 |
$0 |
N/A |
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q1 2007 |
Q1 2006 |
Change | |
|---|---|---|---|
|
Cash From Ops. |
$7,454 |
$5,920 |
25.9% |
|
Capital Expenditures |
$3,828 |
$193 |
1,880.6% |
|
Free Cash Flow |
$3,627 |
$5,727 |
(36.7%) |
|
$2,162 |
$6,356 |
(66.0%) |
Free cash flow is a Fool's best friend.
Cash Conversion Checkup
|
Q1 2007 |
Q1 2006 |
Change | |
|---|---|---|---|
|
Days in Inventory |
51.7 |
57.1 |
(5.3) |
|
Days in Receivables |
26.9 |
42.1 |
(15.2) |
|
Days Payables Outstanding |
54.4 |
26.7 |
27.7 |
|
Cash Conversion Cycle |
24.2 |
72.5 |
(48.3) |
Learn why cash conversion metrics matter to retailers.
Related Foolishness:
- Foolish Forecast: Pray for True Religion
- Fellow Fool Seth Jayson hates everything.
- Urban Outfitters' Indie Cred
- Foolish Fundamentals: Cash Conversion Cycle
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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.
At the time of publication, Anders Bylund was a True Religion shareholder but had no position in any other company mentioned. Fool rules are here.
