How Will True Religion Jump-Start Its Growth?

Tomorrow, True Religion will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

The high-end apparel area has been a haven of growth, even in a fairly weak economic recovery, as upper-income consumers have still had money to spend. But, more recently, even the strength among high-end shoppers has started to falter, and the impact on True Religion's high-priced jeans and other offerings hurt the stock extensively last year. Let's take an early look at what's been happening with True Religion over the past quarter, and what we're likely to see in its quarterly report.

Stats on True Religion

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$113.19 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How will True Religion's earnings fare this quarter?
In recent months, analysts haven't changed their views on True Religion at all, either in the short-run, or for the long-term 2013 and 2014 forecasts. The stock, though, has been anything but unchanged, with gains of more than 20% just since early February.

Most of True Religion's gains came right after the company's report in February, with the company beating estimates for the holiday quarter, as well as providing more optimistic guidance for 2013. Wider gross margins suggested that the company could finally be emerging from more problematic times during 2012, even though strong competition reined in operating margins, and comparable sales remain well below what investors would prefer to see.

The biggest problem for True Religion is that competitors have seen their own prospects rise from prevailing economic trends. Joe's Jeans has bounced back from its own weakness, as the tiny company plans a substantial expansion in store count to help continue its recent track record of strong revenue growth, having returned to profitability. Buckle hasn't seen the same level of sales growth, but it's been able to produce major gains in free cash flow over the past three years, even as True Religion has faltered.

Perhaps in response, True Religion followed through on last October's announcement that it was seeking strategic alternatives for the company, as chairman and CEO Jeff Lubell resigned in March. The move could make it easier for a bidder to emerge with its own vision for the company, although so far, no such buyer has appeared.

In True Religion's quarterly report, investors need to focus on the company's future vision. With somewhat of a leadership vacuum at the top, the company needs to establish whether it expects to continue as an independent entity, or move quickly to seek a buyer. If it doesn't do so quickly, True Religion runs the risk of getting left behind by its competitors.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends The Buckle. The Motley Fool owns shares of The Buckle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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