Truett-Hurst second-quarter sales surge on new brands

HEALDSBURG -- Truett-Hurst, Inc. (Nasdaq: THST) reported its fiscal second-quarter net sales soared 76 percent from a year before, and the startup wine company said it achieved profitability, attributing the boost to innovative new brand packaging in the past few months, new national distribution, more exclusive wines and increased direct-to-consumer marketing.

Key to that jump in sales were the releases of Evocative Wraps for grocery chain Safeway, Paper Boy initially with Safeway and California Square for alcoholic-beverage retailer Total Wines & More, as well as a national distribution agreement with Southern Wine & Spirits, said Phil Hurst, chief executive officer, on a conference call Thursday.

"We continue to execute our business plan, including the launch of innovative products, growth of our direct-to-consumer business and growth of our brands," Mr. Hurst said in a statement.

[caption id="attachment_87284" align="alignleft" width="265"] The launch of the Paper Boy wine in a paperboard shell around a plastic bladder in late 2013 was key to a surge in Truett-Hurst sales for the quarter.[/caption]

Safeway last week expanded its 90-day exclusive sales agreement for the paper-bottle-around-a-bladder Paper Boy brand by another two or three months, and Truett-Hurst has already started shipping to areas without Safeway-related stores and already has interest in "tens of thousands of cases" from retailers, Mr. Hurst said on the call.

Net sales for the quarter, which ended Dec. 31, were nearly $6 million, up from $3.4 million a year before. Wholesale sales accounted for $4.36 million, up 95 percent. Quarterly direct sales via clubs and tasting rooms for the Truett-Hurst and VML brands amounted to $1.09 million, up 44 percent. Direct sales over the Internet were $548,000, up 33 percent.

For the first half of the fiscal year, net sales were $11.38 million, up 33 percent from that pace a year before. By channel, net sales over six months were $8.38 million for wholesale, up 30 percent; $2.02 million for club and tasting-room sales, up 34 percent; and $984,000 for Internet sales, up 67 percent.

The company eked into the black in its second quarter and first half. Net income after taxes was $148,000 and $33,000, respectively, for Truett-Hurst and the HDD, LLC, group of original partners, and $40,000 and $7,000 just for Truett-Hurst. Gross margin was 35.4 percent for the quarter and 34.4 percent for the first half, up from 32.7 percent and 32.1 percent respectively.

Truett-Hurst on Thursday affirmed its guidance on sales and gross margin for fiscal 2014 -- $24 million--$28 million and 31 percent--34 percent, respectively. Anticipated operating expenses were revised to $7.6 million--$8.3 million, reflecting a favorable variance as a percentage of net sales compared with fiscal 2013.

Shares of Truett-Hurst stock, which started trading June 25, were $6 each at the end of trading Thursday. That's up more than 16 percent from the Wednesday closing price.

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