North Bay Business Journal

Tuesday, May 6, 2014, 6:17 pm

New products propel Truett-Hurst third-quarter sales 44%

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    HEALDSBURG — Truett-Hurst Inc. (Nasdaq: THST), reported sales soared 44 percent in its fiscal third quarter and 36 percent over nine months.

    Truett-Hurst“Our revolutionary new brand introductions including the Evocative Wraps, California Square and PaperBoy are gaining traction in the marketplace and evolving from an introductory retailer exclusive program to national and international distribution in the broad market,” said Phil Hurst, CEO, in a statement. “These brands, in conjunction with expanded new retailer exclusive listings, our broader portfolio and future innovations, will continue to drive Truett-Hurst’s growth.”

    Margins for the quarter, ended March 31, held steady at 34 percent, a slight improvement year over year.

    All sales channels have had strong growth, Mr. Hurst said. Wholesale net sales increased 54 percent and 36 percent for the third quarter and nine months, respectively. That was attributed to continued sales throughout the portfolio.

    “As we build out infrastructure in personnel and systems, including those costs associated with being a public company, we are beginning to realize leverage in operating expenses as a percentage of sales,” said Jim Bielenberg, chief financial officer. “Further progress should continue as we grow the top line.”

    Wine club sales and Truett-Hurst and VML tasting room traffic drove direct-to-consumer net sales 17 percent and 28 percent for the third quarter and nine months, respectively.

    Internet net sales increased 46 percent and 58 percent for the third quarter and nine months. That was tied to increased website traffic and sales mix, including higher priced, limited-production wines. Truett-Hurst acquired The Wine Spies in August, boosting first-quarter fiscal 2013 sales.

    International net sales, particularly to Canada and Mexico, were $400,000 and $1.1 million for the third quarter and nine months, up from $10,000 and $200,000 a year before.

    Gross profit margins were 34.0 percent and 34.2 percent of net sales for the third quarter and nine months. Quarterly margins slipped 330 basis points, attributed to the sales mix between the three channels, but year-to-date margins increased 60 basis points.

    Wholesale channel margins improved 70 basis points for the quarter and 190 basis points year-to-date, excluding $80,000 inventory write-down in the quarter.

    Direct-to-consumer channel gross margins increased 500 and 380 basis points for the quarter and nine months, respectively. That was attributed to sales mix, reduced discountin, and selected price increases associated with certain vintage transitions.

    Internet sales gross margins for the quarter and nine months decreased 1,490 and 920 basis points, respectively. Truett-Hurst said it continues to emphasize and achieve gross-profit goals over gross margin by offering higher-priced wines.

    Net loss for the quarter and nine months totaled $600,000 for the quarter and nine months, not including H.D.D. LLC’s noncontrolling interest. The loss included the disclosed provision for loss on deposit of $400,000 from the former paper bottle supplier’s filing of administration in the U.K.

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