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UPDATE 4-Jeans maker True Religion says exploring sale

* Receives interest from potential buyers

* Shares jump 25 percent

* Proposals from private equity firms and rivals - WSJ

* Brand seen fading as premium denim sector struggles

(Adds analyst comment) By Juhi Arora and Siddharth Cavale

Oct 10 (Reuters) - Premium jeans maker True Religion ApparelInc , which has been hit by falling sales after a seriesof fashion missteps, said it may sell itself after receivinginterest 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 colorful jeans that sell for up to$360 at its specialty boutiques, has been hit by falling demandas consumers switch to lower-priced denim. The company's saleshave fallen 12 percent over the last three quarters.

"True Religion has all of the hallmarks of a fad. It enjoyedits heyday, over-expanded, and lost its core customer," saidanalyst Edward Yruma of KeyBanc Capital Markets.

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

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

True Religion could be worth $26-$37 per share if it wentprivate, said Diana Katz, an analyst with Lazard CapitalMarkets.

DENIM FADES

However, with the premium denim industry struggling it ismore likely to receive a bid at the lower end of the range, Katzsaid in a note to clients.

Guess Inc , known for its namesake jeans, hasresorted to discounting to clear excess inventory as shopperslook for good bargains.

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 the 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, slowing sales have prompted the company tointroduce lower-priced clothes before the holiday season, in anattempt to turn around its women's apparel business.

Yruma said he expected operating margins for 2012 to fall to16.9 percent, just over half their peak of 30.5 percent in 2005.

The company, whose competitors include Joe's Jeans Inc, The Jones Group Inc and Aeropostale Inc, owns and operates 116 stores in the United States aswell as 23 shops elsewhere.

(Additional reporting by Neha Alawadhi; Editing by SaumyadebChakrabarty and Rodney Joyce)

((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/