HEALDSBURG, Calif., Feb. 6, 2014 /PRNewswire/ -- Truett-Hurst Inc. (NASDAQ: THST), an innovative and fast growing super-premium, ultra-premium and luxury wine sales, marketing and production company based in the acclaimed Dry Creek and Russian River Valleys of Sonoma County, California, today reported fiscal year 2014 financial results for its second quarter and six months ended December 31, 2013. 

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"Q2 Sales were up 76%, gross margins were up 8% compared to the same prior year's period and we were profitable for the quarter and year-to-date.  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. Wine quality is better than ever and we received great scores recently from the Wine Spectator and Robert Parker. I'm very proud of our team's work," said Phillip L. Hurst, Truett-Hurst's CEO. 

Sales:  Significant growth was seen in all sales channels.  Wholesale net sales increased 95% and 30% in the second quarter and first six months of fiscal 2014 compared to the same prior year periods and was attributable to the introduction of Paper Boy, Colby Red, continued sales of California Square, our Evocative Wrap programs, growth in our existing broad market distributed brands (Bradford Mountain and Healdsburg Ranches) and the introduction of VML to this channel.  Direct to consumer net sales for our Truett-Hurst and VML branded wines increased 44% and 34% for the second quarter and first six months of fiscal 2014 compared to the same prior year periods and was attributable to our focused efforts to grow the business through wine club sales and leveraging marketing efforts which drove traffic to our tasting rooms.  Internet net sales increased 33% and 67% in the second quarter and first six months of fiscal 2014 compared to the same prior year periods and was attributable to increased website traffic and sales mix with higher priced, limited production wines. 

Gross Margins:  The Company achieved gross profit margins of 35.4% and 34.4% of net sales for the quarter and six months ended December 31, 2013 representing respectively a 270 and 230 basis point improvement compared to the prior-year periods.  The wholesale channel's gross margins increased 400 basis points and 250 basis points respectively and was attributable to new brand introductions at higher price points and the reduction of lower margin wine sales.  Direct to consumer channel's gross margins increased 980 and 320 basis points respectively and was attributable to reduced discounting, and selected price increases associated with vintage transitions.  Internet channel's gross margins decreased 810 and 440 basis points respectively as we focused on top line and gross profit objectives through the sale of higher priced wines.  

Operating Income:  Operating income was $0.1 million and $0.03 million for the second quarter and first six months of fiscal 2014 compared to a net operating loss of $0.5 million and $0.01 million for the same prior year periods.   

Sales and marketing expense totaled $1.3 million and $2.3 million for the second quarter and first six months of fiscal 2014 compared to $0.9 million and $1.6 million for the same prior year periods.  Sales and marketing expense as a percent of net sales totaled 21.3% and 20.5% for the second quarter and first six months of fiscal 2014 compared to 25.8% and 19.3% for the same prior year periods.  General and administrative expense totaled $0.7 million and $1.5 million for the second quarter and first six months of fiscal 2014 compared to $0.7 million and $1.1 million for the same prior year periods.  General and administrative expense as a percent of net sales totaled 11.8% and 13.6% for the second quarter and first six months of fiscal 2014 compared to 21.9% and 12.9% for the same prior year periods. 

James D. Bielenberg, CFO of Truett-Hurst, Inc., states, "We are pleased with our sales growth and continue to invest in infrastructure (people, systems, distribution sales programs) to support our company's evolution.  Greater expense leverage as a percent of sales can be expected as we work towards attaining critical mass."

Mr. Bielenberg concluded, "Based upon our second quarter results and current projections we are providing updated fiscal 2014 annual guidance which assumes there's no deterioration in the U.S. economy."

Updated Fiscal 2014 Guidance

Based upon our current expectations and estimates regarding future results, and subject to the factors described in the Forward-Looking Statements section of this release, which represent risks to this forecast, our updated annual guidance for fiscal 2014 is as follows: 

• net sales between $24 million and $28 million
• gross margin between 31% and 34%
• operating expenses between $7.6 million and $8.3 million

We assume no obligation to update this guidance. The absence of any statement by us in the future should not be presumed to represent an affirmation of this earnings guidance.

Note Regarding Condensed Consolidated Financial Statements

The unaudited condensed consolidated financial statements for the six-month period ended December 31, 2013 and the June 30, 2013 balance sheet, include the results of Truett-Hurst, Inc. and its consolidated subsidiaries: H.D.D. LLC and The Wine Spies, LLC.  The unaudited condensed consolidated financial statements for the six-month period ended December 31, 2012 reflect the results of the LLC and Wine Spies.  Truett-Hurst, Inc.'s fiscal 2013 period is from June 26, 2013 to June 30, 2013 due to the completion of the Company's initial public offering on June 25, 2013. 

Conference Call Details

Truett-Hurst Inc. will conduct a conference call at 10:00 a.m. Pacific Time or 1:00 p.m. Eastern Time, on February 6, 2014 to discuss its second quarter fiscal 2014 results for the period ended December 31, 2013.  To listen to the conference call, dial in approximately ten minutes before the scheduled call to 1.877.870.4263, Canada Toll Free: 1.855.669.9657 or International Toll: 1.412.317.0790 and request Truett-Hurst Second Quarter of Fiscal 2014 Results Call.  The webcast link is: http://www.videonewswire.com/event.asp?id=97911.

A replay of the call will be available for 48 hours beginning about two hours after the call.  To listen to the replay, dial US Toll Free:  1.877.344.7529 or International Toll: 1.412.317.0088 and enter conference number: 10040418.  The call will be available one hour after the end of the conference call through February 17, 2014 at 9:00 am ET.   

About Truett-Hurst Inc.

Truett-Hurst Inc. (NASDAQ: THST) is an innovative and fast-growing super-premium, ultra-premium and luxury wine sales, marketing and production company based in the acclaimed Dry Creek and Russian River Valleys of Sonoma County, California.  Our corporate website is www.truetthurstinc.com.  Our principal executive offices are located at 4035 Westside Road, Healdsburg, California 95448, and our telephone number is 707.431.4423.  We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, enacted on April 5, 2012 ("JOBS Act"), a small reporting company as defined by Section 15(d) of the Exchange Act, and a controlled company as defined by the corporate governance rules of NASDAQ.    

Forward-Looking Statements

This press release and our earnings conference call for the second quarter ended December 31, 2013 contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, that are made as of the date of this press release based upon our current expectations.  All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, estimated revenue, projected costs, prospects, plans, opportunities, and objectives constitute "forward-looking statements."  The words "may," "will," "expect," "intend," "plan," "anticipate," "believe," "estimate," "potential" or "continue" and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words.  Such forward-looking statements include expectations regarding revenue, income, expenses, and other guidance for fiscal 2014, ended June 30, 2014 and any future periods.  These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.  Important factors that could cause such differences include, but are not limited to, a reduction in the supply of grapes and bulk wine available to us; significant competition; any change in our relationships with retailers could harm our business; we may not achieve or maintain profitability in the future; the loss of key employees; a reduction in our access to, or an increase in the cost of, the third-party services we use to produce our wine could harm our business; credit facility restrictions on our current and future operations; failure to protect, or infringement of, trademarks and proprietary rights; these factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report.  We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This press release should be read in conjunction with our most recent annual report on Form 10-K filed on September 27, 2013, and our other reports currently on file with the Securities and Exchange Commission, which contain more detailed discussion of risks and uncertainties that may affect future results.  We do not undertake to update any forward-looking statements unless otherwise required by law.

SOURCE Truett-Hurst Inc.