Truett-Hurst Shows Small Loss On Soaring Sales

NEWS RELEASE

FOR IMMEDIATE RELEASE

September 24, 2013

NASDAQ: THST

Truett-Hurst Inc. Reports Fiscal 2013 Results

 Healdsburg, California (September 24, 2013) – Truett-Hurst Inc. (NASDAQ: THST) an innovative and growing super-premium and ultra-premium wine sales, marketing and production company based in the acclaimed Dry Creek and Russian River Valleys of Sonoma County, California, today announced its consolidated financial results for its 2013 fiscal year ended June 30, 2013.

“We are pleased with our financial performance for our fiscal 2013 period, which we believe reflects the continued successful execution of our strategic business initiatives, coupled with strengthening of overall wine industry demand that we had anticipated to occur,” said Phillip L. Hurst, Truett-Hurst’s CEO. “Our net sales grew by 35% and notably our case sales increase from 187,000 cases in fiscal 2012 to 209,000 cases in fiscal 2013. Heading into our fiscal 2014, I am confident that we are well-positioned to continue to develop and deliver innovative, high-quality and unique product solutions to our customers and continue to provide value for our stockholders.”

 Sales: Net sales for fiscal 2013, ended June 30, 2013, were $17.2 million, up from $12.7 million in the prior-year period. Sales increased due to solid demand for the Company’s products and continued development of sales channels. Wholesale sales increased 18% compared to the prior-year period due to increased case sales of existing brands and the introduction of new brands. Direct to consumer sales increased 45% compared to the prior-year period and was attributable to increased wine club memberships and increased tasting room traffic. The Company had internet sales of $1.5 million for fiscal 2013 due to its 50% acquisition of The Wine Spies LLC.

The Company anticipates further sales growth in fiscal 2014 as it launches the California Square bottle in the first quarter of fiscal 2014 and launches the first paper wine bottle, Paperboy, in the second quarter of fiscal 2014. In addition, the Company has secured additional retail and distributor alliances that we believe will enable the Company to expand its marketing presence.

Gross Margins: The Company achieved gross profit margin of 33% of revenue from all sales channels, which represents an increase of 9% from the prior-year period of 24%. The wholesale gross margin increased 9% compared to the same prior-year period, an increase that was attributable to the introduction of new brands which have higher margins than those introduced in the prior-year period. Direct to consumer margins decreased 4% compared to the same prior-year period and was attributable to an increase in the use of promotions and increased sales of brands with lower margins. The Company will continue to focus on delivering a mix of brands through distributors nationwide and through direct and online sales while striving to reduce production costs and improve gross margins.

Operating Income (Loss): Operating loss was $0.4 million for fiscal 2013 compared to the prior-year period of operating income of $0.5 million. Operating loss primarily consisted of increased sales and marketing expenses, general and administrative expenses, including fees associated with our financial statement audits and non-recurring expenses associated with becoming a publicly held company.

Sales and marketing expenses increased to $3.4 million for the fiscal year ended June 30, 2013 from $2.0 million for the comparable prior-year period. The increase was primarily due to a $0.5 million increase in personnel costs, a $0.3 million increase in sales and marketing expenses associated with Wine Spies sales, a $0.5 million increase in sales promotions and increases in other sales and marketing expenses. General and administrative expense increased to $2.1 million, for the fiscal year ended June 30, 2013 from $0.6 million for the comparable prior-year period. The general and administrative expenses increase was due to a $0.4 million increase in accounting expenses associated with our financial statement audits necessary to become a publicly held company, a $0.4 million increase in personnel costs, a $0.3 million in expenses associated with Wine Spies and a $0.3 million increase in other general and administrative expenses.

James D. Bielenberg, CFO of Truett-Hurst, Inc., states “We are pleased with the progress being made in all aspects of our business and execution against plan. Our FY14 forecasts reflect a continued growth trajectory from the introduction of innovative new brands such as California Square and Paperboy, leveraging our retailer and distributor relationships to grow our existing brands and expanding our direct to consumer and internet businesses”.

Fiscal 2014 Guidance

Based on our current expectations and estimates regarding our future results, and subject to the factors described in the Forward-Looking Statements section of this release, which represent risks to this forecast, we are providing the following annual guidance for our fiscal 2014:

 

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net sales between $24.0 million and $28.0 million

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gross margin between 31% and 34%

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operating expenses between $6.8 million and $7.5 million

 

For fiscal 2014, the Company expects an increase in revenue over the prior year, based on rising market demand, new customer wins and follow-on sales from current customers, many of which are at the early stages in their deployment of our products. The Company expects to increase its sales and marketing resources to support sales growth in all of its key markets. Historically, the Company has experienced uneven quarter over quarter fluctuations in revenue largely due to timing of product launches and customer deployments. The Company expects similar results in fiscal 2014, with the first and second quarters expected to show lower results than the third and fourth quarters.

Earnings Call

Truett-Hurst Inc.’s management will host a conference call today, September 25, 2013, at 10:00 a.m. PST (1:00 p.m. EST) to discuss the Company’s financial results and financial guidance. To listen to the conference call, dial in approximately ten minutes before the scheduled call to 1.800.860.2422 and request Truett-Hurst 2013 Results Call or visit our webcast link: http://www.videonewswire.com/event.asp?id=95992. A replay of the call will be available, to listen to the replay, dial US Toll Free: 1.877.344.7529 or International Toll: 1.412.317.0088 and enter conference number: 10033927. The call will be available one hour after the end of the conference call through October 10, 2013 at 9:00 am ET.