• Q1 profit plummeted 96.4% to $383,000
  • Net sales increased 13.1% to $120.8m
  • Company agrees $835m buyout 

Upmarket jeans and denim brand True Religion has seen its first-quarter profit plummet 96.4% after it was hit by severance costs as well as increased discounts to sell excess merchandise. 

The Vernon, California-based company said net income was US$383,000 for the three months to 31 March, compared to $10.7m in the same period last year. 

Excluding "executive separation costs" of $7.5m and expenses linked to its review of strategic alternatives, adjusted net income attributable to True Religion was $5.7m. Company founder and chief executive Jeffrey Lubell stepped down in March.

Net sales, however, increased 13.1% to $120.8m from $106.8m the prior year. US consumer direct sales rose 12.1% to $73.3m, while same-store sales were up 0.7%. US wholesale sales jumped 19.1% to $25.5m, driven by growth in the off-price and specialty store channels.

Gross margin declined 350 basis points to 61%.

The company has also revealed it will be taken private by investment group TowerBrook Capital Partners in a buyout deal worth $835m.