MAKING MONEY IN HIGH-END FASHION: If I heard someone proclaim, “the US consumer is dead” once, I have heard it hundreds of times. Retail spending has come down from its peak, but there are still a handful of apparel companies and retailers that are able to continue to grow business. Yesterday True Religion Apparel (TRLG), best known for their high-end jeans with the horseshoe on the back pocket reported better than expected earnings and raised guidance. Revenue for the quarter rose 12% over last year and earnings per share came in at $0.45 versus estimates of $0.39; an increase of 13% in EPS over last year.
The biggest boost in revenue came from its consumer direct segment, which includes the True Religion stores throughout the country. For fiscal 2009, TRLG now sees EPS at a range of $1.76 to $1.84, slightly higher than the previous forecast and raised revenue to a range of $293 to $300. If the numbers turn out to be true it will result in the company continuing its streak of increasing both revenue and net income even in the face of the recession.
THE BOTTOMLINE - HOW TO MAKE MONEY: Based on the middle of the EPS range from the company, the stock closed Wednesday trading at a P/E ratio of 13.06. Based on 2010 estimates from First Call for EPS of $2.04, the stock is trading at a P/E of 11.53. Considering the growth of the company, I feel TRLG is undervalued looking out 12-24 months. Technically the stock attempted a breakout yesterday above $25, but failed to hold and finished the session up 4.5% at $23.52. An entry near $22.00 is attractive for a long-term investor with a stop of about 15%. The upside target would be in the low $30’s. When looking at competitors, particularly in the high-end denim market there is not much available for investors in the stock market.
The only true competitor that trades on a major exchange is Innovo Group (JOEZ), which makes Joe’s Jeans. I do have family ties to JOEZ and it trades under $1 so I will not give my opinion on the stock. But I will give my opinion on high-end denim. I believe the trend that has been going strong for several years is here to stay. In my house there are closets full of True Religion jeans and other $250+ brands. Whether it is going to the local pub with friends or a dinner party, it is now acceptable to wear high-end jeans and boy do I take advantage of it. | 
