yahoo.reuters.com
True Religion CEO says Street undervalues company
Tue Aug 29, 2006 9:01pm ET
By Alexandria Sage
LAS VEGAS, Aug 29 (Reuters) - True Religion Apparel Inc.'s (TRLG.O: Quote, Profile, Research) chief executive said on Tuesday that he believes his company is undervalued by Wall Street even as the jeans maker and retailer seeks to quickly grow into a premium lifestyle apparel brand.
At the Magic Marketplace apparel trade show held in Las Vegas, Chief Executive Jeffrey Lubell told Reuters he was confident that consumers would be willing to pay premium prices for such non-denim items as fleece, suede, loungewear -- even surf- and skate-inspired apparel -- as the company expands.
Lubell said True Religion, which aspires to eventually have $1 billion in global revenue, says it expects sales of $148 million this year, representing growth of nearly 50 percent growth.
But he lamented the fact that the company is valued at a discount to fast-growing rival Under Armour Inc. (UARM.O: Quote, Profile, Research).
"I'm not getting the same valuation," Lubell said. "I don't know why."
True Religion trades at 13 times its expected 2007 profit while Under Armour, whose sales are nearly triple those of True Religion, is valued at 40 times next year's estimated earnings.
Analyst Eric Beder of Brean, Murray Carret said that True Religion's valuation has suffered because it went public through a reverse merger and did not have the well-publicized start of Under Armour, which listed its shares in November.
"If you look at the growth rates he (Lubell) has got a fairly valid point, really," Beder said.
Beder added that questions among some analysts and investors about whether the popularity of premium denim will fade have also played a role in True Religion's valuation.
True Religion, whose premium jeans retail for as much as $300, announced earlier this month that it had hired investment bank Goldman Sachs to evaluate strategic alternatives, fueling speculation on Wall Street that the company may intend to go private.
President Michael Buckley said the company was looking at all alternatives that could help the Los Angeles-based company reach the billion-dollar mark more quickly.
"We're not very patient," Buckley said, adding that the company will announce a couple of licensing deals "very soon."
Revenue from those licenses will contribute to revenue in the second half of next year, he said. Eventually such licenses will cover bags, wallets, fragrance, belts, footwear and sunglasses.
Long-term, True Religion wants to make non-denim apparel, such as outerwear, children's lines, fleece, wovens and knits account for half of its business.
Lubell said he'd even like to eventually tap into the lucrative surf- and skate-inspired clothing arena that is dominated by apparel giant Quiksilver Inc. (ZQK.N: Quote, Profile, Research)
"That market is huge," Lubell said, adding that he could even envision True Religion surfboards and wet suits. "If the product is right, the people will pay for it."
True Religion, which is also expanding internationally, plans to open three new stores and an outlet center in the fourth quarter, with at least seven more stores in 2007.
For fiscal 2006, True Religion is expecting adjusted earnings per share of about $1.25, compared to Wall Street estimates of $1.27, according to Reuters Estimates.
True Religion shares closed at $20.09 on Nasdaq, up 2 percent or 44 cents. |
