True Religion Apparel Inc., the maker of the namesake designer jeans, surged the most in more than three years after saying it will explore strategic alternatives, including a possible sale.
The company has received interest from private-equity firms and other apparel companies, said a person familiar with the matter, who asked not to be named as the talks aren’t public. The shares jumped 22 percent to $25.71 at the close in New York for the biggest gain since May 2009. The stock has declined 26 percent this year.
True Religion has lost female customers because it’s maintained higher prices than competitors such as VF Corp.’s 7 for All Mankind label and has been slow to add more fashion-forward merchandise. While sales rose 15 percent to $419.8 million in 2011, True Religion’s profitability has slid. The company’s operating margin narrowed to 17.8 percent last year from 33.2 percent in 2005.
The board has formed a special committee to consider options after receiving interest from third parties about a possible transaction, Vernon, California-based True Religion said today in a statement. The company said it hired Guggenheim Securities LLC as its financial adviser and Greenberg Traurig LLP as its legal counsel.
True Religion has a small overseas presence and little online retail activity, and a buyer with those capabilities would help, the person said.
A sale to private equity might be more suitable as the company works to build infrastructure to accommodate its “tremendous growth prospects,” Dorothy Lakner, an analyst at Caris & Co. in New York, said today in a telephone interview.
“What they haven’t done is build the brand beyond the denim side of things” into a broader lifestyle brand, said Lakner, who rates the shares above average.
True Religion was founded in 2002 by Jeffrey Lubell, who began embellishing jeans as a teen growing up in New York. He took the company public the following year, according to its website. True Religion operates 139 of its own stores and sells its merchandise worldwide.