True Religion Apparel (NASDAQ: TRLG), makers of high-end blue jeans, saw the day end as one of NASDAQ’s biggest movers. Yesterday saw True Religion close at $21.01 following a brisk day of trading. Today, True Religion opened the day at $25.87 and refused to relinquish the majority of this massive gain over the course of today’s trading.
Closing at $25.71, True Religion Apparel enjoyed a gain of $4.70, up 22.4% on the day. Over the last 90 days, True Religion has averaged less than half a million shares traded each day. Today saw nearly eight million shares changing hands.
Many believe that True Religion is on the auction block, and True Religion currently has no intention of dissuading this interest from potential suitors. The stock has traded as high as $35.12 in 2012, but has been stumbling around the $20.00-mark for the last two months. Today’s gains were certainly greeted with investors’ smiles as it enjoyed its largest single day gain in over a year.
The most likely parties to acquire True Religion are Guess? (NYSE: GES) and The Buckle (NYSE: BKE), though each have potential downsides to consider. Guess? only sells its own jeans and would seemingly have little reason to acquire True Religion. Guess? has also bitten into True Religion’s market share by offering comparable products at roughly half the price. The average pair of men’s jeans sold by True Religion will set you back $200 where Guess’ products are generally sold under $100.
The Buckle makes more sense. The Buckle currently operates around 440 stores, all of them located in the US. True Religion runs about 120 stores in the US and about 25 internationally. With today’s jump, True Religion is valued at $659 million, while Buckle is presently a $2.2 billion company.
The question The Buckle must ask itself is whether or not 25 international stores are worth it. The Buckle has been steadily stealing market share from True Religion and may be better served by simply watching it circle the drain rather than spending a large amount of money rescuing its direct competitor.
Short of these two options, who else could be sniffing around True Religion? A department store? Nordstrom is a name that pops to mind for a number of analysts, but it’s difficult to see what Nordstrom would gain outside of a myriad of headaches, as it has no need to make its own jeans. JC Penney’s is another name that has been bandied about by speculators. Though this would represent a major coup for the retailer, it’s difficult to envision JC Penney’s customers forking over $200 for a single pair of jeans.
In all likelihood, if True Religion is sold by year’s end, it will be the work of an activist investing group that views True Religion as an opportunity to purchase it, right the ship, then sell it in the short term.
Whichever way this goes, keep an eye on True Religion in the coming weeks.
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