True Religion Is Going, Going, Gone!


On Friday, True Religion announced that TowerBrook, a private investment firm, has purchased it. The denim retailer went for $32 per share, which was an 8.7% premium to Thursday's closing price. It must come as a welcome relief to many investors, who have watched the stock roll between $20 and $30 over the past year.

For TowerBrook, the brand offers a new dimension for growth. The company's current portfolio contains only one other apparel company, Phase Eight, a U.K. retailer that TowerBrook invested in in 2011. TowerBrook has seen success with apparel in the past, though, selling Jimmy Choo to Labelux in 2011.

True Religion stalled out
True Religion had slowed recently, and this week's results were more of the same. While total sales were up 13%, comparable sales were up only 0.7%. Last year, same-store sales were up 2.7% for the full year, and 1.5% for the fourth quarter. Operating margin has also fallen over the last few years, hitting 17% last year -- last quarter's operating margin dropped to 2.5% because of costs associated with the loss of former CEO Jeff Lubell.

TowerBrook said it saw potential in True Religion's "established, high-end brand [and] strong retail network and a loyal following." The company hopes to close the transaction by the third quarter of this year.

So -- now what?
If you really wanted to invest in True Religion, or if you're soon to be a "former" shareholder, let's take this opportunity to move on. The True Religion ship has sailed, but there are plenty of other yachts in the harbor. We'll start with The Buckle , which is a longtime favorite of mine.

The Buckle's comparable sales were slightly higher than True Religion's last year, at 2.1%. The big differentiation comes from The Buckle's operating margin, which came in at 23%. On top of the strong operational data, The Buckle has a history of paying out an excellent dividend. On top of the regular dividend, The Buckle has paid a special dividend for years, with 2012's dividend coming in at $4.50 per share -- 10% of the stock's price on the date of payment.

If The Buckle doesn't float your boat, maybe American Eagle is for you. American Eagle is more diverse in its offerings than Buckle, carrying shoes, shirts, cologne, and, later this year, personal-care products. American Eagle has had a strong year, with comparable sales up 9% last year. The stock is actually down over the past 12 months, and it trades at a slight discount to The Buckle. Now could be a good time to get on board for a potential rebound.

While True Religion is gone, that doesn't mean investors can no longer own this market. Denim has come through a tough few years, with cotton prices spiking and a promotional environment gone wild. If we've learned nothing, we've learned that consumers have an appetite for jeans, so investors should, too.

Michael Kors is one of today's hottest high-end fashion brands, and that's translated into one of the best-performing stocks in retail -- since its debut on the market in late 2011, the share price has more than doubled. But with all that growth, has the stock finally become too expensive, or is there still room left to run? The Motley Fool's premium report on Michael Kors gives investors all the information they need to make the right decision. We cover the key must-watch areas, opportunities, and threats to the company that investors need to know. To claim your copy, simply click here now for instant access.

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Fool contributor Andrew Marder owns shares of The Buckle. The Motley Fool recommends and owns shares of The Buckle. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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