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UPDATE 3-Denim maker True Religion says exploring sale

* Receives interest from potential buyers

* Shares up 25 percent

* Proposals from private equity firms and rivals - WSJ

(Adds analyst comments, background)

By Juhi Arora and Siddharth Cavale

Oct 10 (Reuters) - Premium jeans maker True Religion ApparelInc , which has been hit by falling sales, said it maysell itself after receiving interest from potential buyers.

Shares of the company jumped as much as 25 percent to $26.25in early trading on Wednesday, valuing it at about $680 million.They had fallen by about a quarter in the last three months.

True Religion, known for its colorful jeans that sell for upto $360 at its specialty boutiques, has been hit by fallingdemand as consumers switch to lower-priced denim. The company'ssales have fallen 12 percent over the last three quarters.

"The company has undergone a number of fashion missteps.More importantly, we question the relevancy of the brand,particularly given its premium price point," said analyst EdwardYruma of KayBanc Capital Markets.

Weak demand for True Religion's women's range in particular,including jeans and shirts with serape patterns, prints andcolored stitching, forced the company to cut its full-yearprofit outlook in July.

The Wall Street Journal reported earlier that the companyhad fielded buyout proposals from private equity firms andapparel industry companies. ()

True Religion said it had formed a special committeecomprising non-management directors and had hired GuggenheimSecurities LLC as financial adviser and Greenberg Traurig LLP aslegal counsel to assist in a strategic review.

Guggenheim Securities and Greenberg were not immediatelyavailable for comment.

True Religion, founded in 2002 by CEO Jeffrey Lubell, madeits mark with jeans that featured colorful reinforced stitchingand oversized low flap pockets.

Sales soared over the decade as celebrities such as AngelinaJolie, Jessica Simpson, Megan Fox and Jennifer Lopez were seenwearing the jeans.

However, sales growth has slowed in the past year, promptingthe company to introduce lower-priced clothes before the holidayseason in an attempt to turn around its women's apparelbusiness.

"True Religion has all of the hallmarks of a fad. It enjoyedits heyday, over-expanded, and lost its core customer," KeyBancCapital Markets analyst Edward Yruma said. He expects operatingmargins for 2012 to fall to 16.9 percent, well below their peakof 30.5 percent in 2005.

The company, whose competitors include Joe's Jeans Inc

and Aeropostale Inc , owns and operates 116stores in the United States as well as 23 international shops.

(Additional reporting by Neha Alawadhi and Siddharth Cavale inBangalore; Editing by Sreejiraj Eluvangal and SaumyadebChakrabarty)

((neha.alawadhi@thomsonreuters.com)(within U.S. +1 646 2238780, outside U.S. +91 80 41356385)(neha.alawadhi.thomsonreuters.com@reuters.net))

Keywords: TRUERELIGIONAPPAREL ACQUISITION/