My post from Yahoo board:
I offer these reasons to be bullish on TRLG.
This is a bona fide growth story that is still in the early stages:
- Management is looking to outperform Q4 guidance
- Department store orders are increasing
- Demand remains strong; they have a backlog thru April 2006
- Expect 100% plus growth internationally in 2006. TRLG is entering 10 new countries in 2006, including China; none of this revenue is in 2006 projections! Sterne, Agee said, "We believe sales could double in Europe in 2006."
- CEO said on the last con call: "We are at the starting line, not the finish line"
TRLG still has solid fundamentals, even after this run:
- Its made money in nine of its last 10 quarters.
- Its earnings catapulted 1,600%, 800% and 560% in the first three quarters of this year.
- Has a fat net profit margin of 20%, better than Columbia Sporstwear (11.7%), Guess? (5.7%) and Ralph Lauren (7%)
- Gross margins increased from 47% to 52.7% in Q3
- Had quarterly earnings growth of 710% revenue growth of 376% (YoY)
- Forward PE is only 16.3 (for a company growing at over 50% a year!)
- PEG .35
- ROE 107%
- ROA 82%
- projected EPS growth is 62.5%, better than Columbia Sporstwear (12.4%), Guess? (21%) and Ralph Lauren (15.2%)
- has $10.5 million of cash and no debt
- Earnings estimates have risen steadily for this year (from $.80 to $.90 the last 90 days) and next year ($1.15 to $1.19), bringing valuations down. A very bullish sign. finance.yahoo.com
- We haven't see the numbers yet from the Manhattan Beach store, of which Lesser is quoted as saying, "sales were fantastic" a few weeks back. They have said they would use the store as a marketing lab to gauge customer reactions to new lines as they expand; it is close enough they can meet there for coffee. "Our first store will be used as a test center for new products as well as display our increasingly diversified product line. Our collection has grown significantly over the past year," said Kymberly Lubell. "We will carefully monitor the performance of this store to ensure that it will enhance our brand image and lead to stronger sales of our entire line before any decisions are made to open additional stores." Per Yahoo maps, the store is 22 miles from TRLG's office:
maps.yahoo.com
- The NYC store is expected to open next, then possibly stores in Las Vegas, Phoenix, and San Francisco.
- There are about 3mil shares in the actual float and 4.2mil shares short. It has a short interest ratio of 7.9; greater than 2.0 is often considered a sign that a stock price will climb because a short position must be covered, creating buying pressure.
- The planned sale of 300k by the Lubell Trust is out of the way early in the quarter, leaving one more planned sale, as announced.
- Price targets from different analysts are $23 and $24. BB&T Capital Markets nailed the bullish outlook when they said, "We believe a more diverse product offering, coupled with continued international expansion should help support both top and bottom-line growth."
- TRLG has an average daily dollar volume of nearly $12 million and is now a $20 stock, which means it is more attractive to big money than a year ago when it was much smaller. Tellingly, TRLG is showing an increase of institutional buyers: 30 new institutions have started TRLG positions (for 5 mil shares) and
35 institutions have increased their positions (6.1 mil shares). Institutional ownership is now at 49.8%
nasdaq.com
- It's starting to get exposure to new customers and investors. It has a new retail store and distributors set up in Japan, France, Canada, Mexico, the UK, Italy, Norway, Spain, Sweden, Denmark, Germany, Switzerland, and Holland. IBD ran a lengthy profile on 12/9. Do a Google search on the LA Times story from 12/30 and you see it was picked up and ran in Seattle, Miami, Italy, Connecticut, Maine, Arkansas, and California. They are among 90 companies with strong brands invited to present at the 8th annual ICR Xchange in Naples, FL on Jan. 13. Six analysts are now following TRLG; more stories and interest will follow, especially with the increased volume and a 52-week high.
- Insider buying by a director
- Bullish comments by CEO Nov. 10: "We had another fantastic quarter and were very pleased with our record revenue, margins and earnings results," commented Jeff Lubell, President and Chief Executive Officer. "Our average sales per door in the U.S. increased by thirty percent compared to the prior quarter fueled by strong sales of both denim and non-denim products. Our international business remains very healthy and was responsible for nearly half of our total revenues in the third quarter. We believe we have a considerable opportunity to increase our penetration among our existing country distributors as well as expand our door count into additional countries over the next several quarters."
Mr. Lubell concluded, "With our increasingly diversified product assortment, we are becoming a well-rounded, branded business that is anchored by premium denim. More and more customers are drawn to our brand not only for our customized, fashionable denim products, but also for our broadened collection of tops, skirts, t-shirts and bottoms that are offered in a variety of unique fabrics and fits."
- They have a history of beating expectations, even after raising guidance. They raised Q3 guidance on October 11 to .29-.30 then on November 10 report .33. Also on November 10 they raised 2005 estimates and said they are increasingly confident about 2006 guidance. This reminds me of Microsoft, circa 1988.
- Consumers who buy premium products have clothing budgets that are 63% higher than the average clothing shopper (Cotton, Inc.)
- The executives in charge have tremendous experience in denim marketing, design, and fit. They each bring complimentary skill sets. Lubell has logged 25 years experience. He and his wife have a background in denim, having helped launch the Hippie Jeans and Bella Dahl brands. The founder of their Japanese distributor has 25 years of experience introducing U.S. brands into the Japanese market. Management knows what the high end customer wants. IBD story: "After Lesser joined True Religion in July 2003 and had been on the job three weeks, he fired the sales force. He quickly cast about for people who had experience selling high-end jeans to the boutiques and luxury stores where True Religion wanted to go. He and Lubell wanted salespeople knowledgeable about finishes, seams and other details. One of their biggest sales coups was hiring veteran premium jeans saleswoman Jana Rangel as their chief U.S. sales representative. "She took Earl Jeans, where she worked before, from a baby company to $28 million in sales in a short period," said Lubell. So when Rangel expressed an interest in joining True Religion, "I knew we were poised for success," Lubell said.
- Their designs and finish set them apart and creates repeat customers. Sheryl Crowe was profiled in InStyle recently and said she owns 20 pairs of True Religion jeans. LA Times story: "But to many of young women who buy them, what separates True Religion from the pack is styling. Seams that twist inward on its Joey jeans are meant to give the illusion of thinner legs. Low flap pockets on the rear make the bottom look perkier. "It's all about the butt..."
- They don't issue a bunch of frivolous press releases; they focus on customers, design, and business.
- They've expanded beyond just jeans. They are working to make True Religion a lifestyle brand, moving from men's to women's and now to kids. They now offer over three hundred individual pieces. "Our collection has grown significantly over the past year and our product line now includes denim, corduroy, velvet, cotton bottoms and jackets and a variety of unique styles in knitwear, fleece sweat suits, vests, t-shirts and a line for children ages 2 to 14." They expect the addition of new fleece line to do $10 million or more in 2006. They will be introducing cashmere sweaters in 2006. Super T bottoms started to ship in Q4.
- While Google gets all the attention TRLG has actually been a much better stock:
finance.yahoo.com
- TRLG rank within the IBD Apparel-Clothing Mfg Group (TRLG, GIL, VLCM, CRI, RL):
Overall Rank: 1st out of 46 stocks; Technical Rank: 2nd out of 46 stocks; Fundamental Rank: 7th out of 46 stocks; Attractiveness Rank: 2nd out of 46 stocks
- Lastly, the shorts have it wrong. People who buy $200 jeans are not like everybody else. They don't post on Yahoo boards. They shop. |
