Truett-Hurst reports fiscal Q3 net loss of US$184,000, compared to year-ago loss of US$177,000; net sales rise 44.4% to US$5.2M

HEALDSBURG, California , May 6, 2014 (press release) – Truett-Hurst Inc. (THST), today reported fiscal year 2014 financial results for its third quarter and nine months ended March 31, 2014.

"Our net sales continue to grow, increasing 44% for the quarter and 36% year-to-date compared to the same periods last year. Margins held steady at 34%, representing a slight improvement year over year. 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. These brands, in conjunction with expanded new retailer exclusive listings, our broader portfolio and future innovations, will continue to drive Truett-Hurst's growth," said Phillip L. Hurst, Truett-Hurst's CEO.

Sales: Strong growth was seen in all sales channels. Wholesale net sales increased 54% and 36% for the third quarter and nine months ended March 31, 2014 compared to the prior-year periods and was attributable to continued sales throughout the portfolio, including California Square®, Colby Red® and the Evocative Wraps. Direct to consumer net sales through our Truett-Hurst and VML tasting rooms increased 17% and 28% for the third quarter and nine months ended March 31, 2014 compared to the prior-year periods and was attributable to wine club sales and tasting room traffic. Internet net sales increased 46% and 58% for the third quarter and nine months ended March 31, 2014 compared to the prior-year periods (The Wine Spies LLC was acquired in August, our first quarter of fiscal 2013) due to increased website traffic and sales mix, including higher priced, limited production wines. International net sales, Canada and Mexico, were $0.4 million and $1.1 for the third quarter and nine-months of FY14 compared to $0.01 million and $0.2 million for the prior year periods.

Gross Margins: We achieved gross profit margins of 34.0% and 34.2% of net sales for the quarter and nine months ended March 31, 2014, respectively. Compared to the prior-year periods, quarter over quarter margins decreased 330 basis points due to sales mix between the three channels, but year-to-date margins increased 60 basis points. The wholesale channel margins compared to the prior-year periods, excluding the effect of a $0.08 million inventory write-down in the quarter, improved 70 basis points for the quarter and 190 basis points year-to-date. The direct to consumer channel gross margins increased 500 and 380 basis points, respectively, and were attributable to sales mix, reduced discounting, and selected price increases associated with certain vintage transitions. The internet channel gross margins decreased 1,490 and 920 basis points, respectively, as we continue to emphasize and achieve gross profit goals over gross margin by offering higher priced wines.

Operating Loss: The fiscal 2014 net loss for the quarter and nine months ended March 31, 2014, before H.D.D. LLC's non-controlling interest totaled $0.6 million for each period which included the disclosed provision for loss on deposit of $0.4 million from our former paper bottle supplier's filing of administration in the UK compared to $0.3 million and $0.5 million for the prior-year periods.

Sales and marketing expense as a percentage of net sales improved for the quarter from 28.1% to 24.3% and slightly for the year, compared to the prior-year periods. General and administrative expense as a percentage of net sales improved for the quarter from 16.0% to 14.3% and was flat for the year compared to the prior-year periods.

James D. Bielenberg, CFO of Truett-Hurst, Inc., states, "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. Further progress should continue as we grow the top line. " Mr. Bielenberg concluded, "Based upon our third quarter results and current projections we believe we are in line with our revised fiscal 2014 annual guidance of March 6, 2014 furnished on Form 8-K, which assumes there's no deterioration in the U.S. economy."

We assume no obligation to update our fiscal 2014 annual 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 three and nine-month periods ended March 31, 2014 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 three and nine-month periods ended March 31, 2013 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 (1:00 p.m. Eastern Time), on May 7, 2014 to discuss its third quarter fiscal 2014 results for the period ended March 31, 2014. 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 Third Quarter of Fiscal 2014 Results Call. The webcast link is: http://www.videonewswire.com/event.asp?id=99150.

A replay of the call will be available one hour after the end of the conference call through May 19, 2014 at 9:00 am ET. To listen to the replay, dial US Toll Free: 1.877.344.7529 or International Toll: 1.412.317.0088 and enter conference number: 10045548.

About Truett-Hurst Inc.

Truett-Hurst Inc. (NASDAQ: THST, http://www.truetthurstinc.com) is a holding company and its sole asset is the controlling equity interest in H.D.D. LLC., 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. 

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