By: Dylan Sikes - AllPennyStocks.com News

Monday, August 26, 2013

It can be a long grind for young companies to maneuver down the path to profitability. Small marketing budgets and tough market conditions are just a few of the challenges that must be overcome. To that point, it’s often better to take a look at the progression of a company to simultaneously contain costs and grow sales, rather than solely focus on one point or the other. Respect Your Universe, Inc. (TSX-Venture:RYU) (OTCQB:RYUN) seems to be making positive progress, according to its second-quarter results that were disclosed on Monday, although the athletic apparel company still posted a net loss. The Portland-based company sells a complete line of apparel for men and women including compression wear, hats, bamboo/polyester tees, fleeces, accessories and more.

2012 was a relatively bleak year for a cash-strapped RYU, but things have gotten better so far in 2013, thanks in part to a $1.8-million capital raise and strong sales at its first retail store in Las Vegas.

For the quarter ended August 13, RYU reported revenues of $295,912, up 175 percent compared to $107,522 in the second quarter of 2012. A large portion of the increased sales came from the Las Vegas location, which opened in October 2012. Sales at that store were $110,000 in the latest quarter. Wholesale revenue increased by $91,000 as RYU sold closeout products in Q2 2013, which didn’t happen in last year’s quarter.

Net loss was more than halved to $1.14 million during the quarter, versus a net loss of $2.44 million in the year prior quarter. Operating expenses were chopped by $1.23 million to account for most of the improvement in net losses. In a statement today, the company attributed fewer costs to the expiration of a marketing contract, termination of a product design contract and less spending on investor relations.

"Our store in Las Vegas continues a positive sales trend which affirms our strategy of increased value to our customer and provides clearer direction for future revenue growth. I am very excited about the repositioning of our brand to reach larger consumer markets and these results in Las Vegas help affirm our growth strategy,” said Craig Brod, chief executive at Respect Your Universe. Brod added that the company expects to open more pop-up locations and expand its retail store strategy.

In addition to domestic initiatives, part of the growth strategy certainly seems market penetration in the Far East. The company has inked a non-binding deal with Luxey International Holdings Limited of Hong Kong, an apparel retailer with physical locations and an online presence. RYU has also worked with Guru-Online, a social media company in Hong Kong to build brand recognition.

US-listed shares are reacting to today’s news of improving financials, advancing 19.34 percent to 24 cents towards the end of the trading day. Technically speaking, shares have held a support level around 18 cents, last touching that level in April before climbing to 44 cents in June and then descending back to lows of 19 cents on Friday. Potentially making a “double bottom” pattern, technical traders will be watching for the stock price to try and continue to climb from the support point. Fundamental traders will be watching for RYU to continue to narrow the gap towards profitability and further improvement in sales. Proper due diligence is, as always, encouraged.

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