True Religion Apparel disputes analysis of Japan sales
5:30 p.m. 04/19/2006
By Herb Greenberg
(Kudos to Lesser for calling up Greenberg and taking this head on. Very impressive IMO. It will be interesting to see what the new president does and how he treats this whole issue.
This paragraph from a profile piece on Greenberg sums up his approach perfectly:
Greenberg “is psychologically incapable of writing a story that says a company has a half-full glass. At the end of the day, he will sandwich my good facts with bad facts, so that the end result of reading his story is a negative inference.”
signonsandiego.com
Also, Morgan Keegan came out with a note discounting Greenberg's thesis:
* We don't agree with many of the assumptions made and believe when TRLG reports first quarter results the company will be vindicated.
* We recommend investors buy on weakness. Yes, the article made the shorts more determined than ever. However, we believe the combination of impressive 1Q:06 results, robust backlog numbers, and a high short interest on a misunderstood company create the perfect backdrop for a short squeeze. Reiterating Outperform rating.)
finance.messages.yahoo.com
True Religion Apparel disputes analysis of Japan sales
5:30 p.m. 04/19/2006
By Herb Greenberg
Commentary: Apparel maker has different view of Japan sales
SAN DIEGO (MarketWatch) -- From the fair and equal treatment department: Heard back from True Religion Apparel's CFO Charles Lesser Wednesday.
While he didn't dispute the numbers in my column from Tuesday, he disagreed with the interpretation. That interpretation, based on disclosures in the company's SEC filings, suggested the jean maker may have stuffed its Japanese distributor at quarter's end with more merchandise than the distributor could reasonably sell.
The column's conclusion was based in part on disclosures in multiple 10-Qs that once True Religion (TRLG) ships product to Japan, the distributor cuts a check that is post-dated 14 days. Any outstanding receivables to Japan at quarter's end, would then appear to follow, reflected shipments within two weeks of the quarter's end.
Lesser says while he can understand the column's thesis, there was no channel stuffing "whatsoever." Sales made to Japan, he says, were made by natural orders placed by the distributor and what the distributor could afford to pay.
As the distributor grew, he says, "the distributor made it clear we would have to finance them a bit. We started with 14-day post-dated checks. As he grew -- and the third quarter was the largest we had with him -- it became clear we were shipping faster than he could pay -- he is growing so rapidly."
By the end of the third quarter, he continues, rather than representing merely two weeks worth of sales -- and despite the disclosure that checks were post-dated 14 days -- Japanese receivables on the books reflected "many" shipments in all of September and maybe the last week of August.
Since then, Lesser adds, the distributor has been in terms and then out of terms and is now seeking a third-party banking relationship "so it can be on better terms with True Religion."
While the distributor still has "a little bit to sell through" from prior shipments, Lesser says "he will get through that and will basically continue to grow."
How are sales to Japan currently? Lesser declined to comment. He also disputed the "rumblings" picked up by this column that the high-end jeans market is starting to slow. "We're doing great," he says. "We publicly increased our guidance for the first quarter and we publicly increased our guidance for the year. Obviously, we feel premium denim is not slowing down, otherwise we would not have increased our guidance."
Time, indeed, will tell.
As for the Japanese situation, the numbers are the numbers and they, combined with Lesser's comments, are subject to whatever interpretation you wish. That, as I like to continually remind you, is what makes markets and why this column exists. |
