(Reuters) - Premium jeans maker True Religion Apparel Inc TRLG.O forecast current-quarter earnings largely below analysts’ expectations after reporting a fall in third-quarter same-store sales as consumers looked for cheaper alternatives.
Shares of the Vernon, California-based company fell as much as 4 percent in morning trading.
True Religion’s sales rose 9 percent to $118.5 million in the quarter ended September 30, helped by its U.S. wholesale business, but sales at stores open for more than a year fell 4.7 percent.
“While our same-store sales fell short of our expectations, we were able to exit the quarter with less slow-moving merchandise,” Chief Executive Jeffrey Lubell said.
Slow-moving styles and apparel sold at higher price points have resulted in the company losing market share to rivals with lower-priced products.
The declining sales led the company to evaluate takeover interest from peers and private equity players last month.
On a post earnings call with analysts on Monday, True Religion said the review was still underway and no deal had been finalized yet.
The company expects fourth-quarter earnings of 52 to 58 cents per share. But this was largely below analysts’ expectations of 58 cents, according to Thomson Reuters I/B/E/S.
The impact of Hurricane Sandy was not included in the guidance, the company said.
“(Sales, general and administrative expense) continued to outpace our expectation and overall (gross margin) was weaker than we had modeled,” Lazard Capital Markets analyst Diana Katz said in a client note.
SG&A costs rose 11 percent in the third quarter.
Overall gross margins fell to 63.3 percent from 64.8 percent due to higher discounted merchandise.
True Religion’s shares were down 1.5 percent at $26.15 in midday trading on the Nasdaq. They touched a low of $25.53 earlier. (Reporting by Siddharth Cavale and Juhi Arora in Bangalore; Editing by Maju Samuel)