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 Apparel Inc , which has been hit by falling sales after a series of fashion missteps, said it may sell itself after receiving interest from potential buyers.

Shares of the company jumped as much as 25 percent to $26.25 in 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 demand as consumers switch to lower-priced denim. The company's sales have fallen 12 percent over the last three quarters.

"True Religion has all of the hallmarks of a fad. It enjoyed its heyday, over-expanded, and lost its core customer," said analyst 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, prints and colored stitching, forced the company to cut its full-year profit outlook in July.

True Religion could be worth $26-$37 per share if it went private, said Diana Katz, an analyst with Lazard Capital Markets.


However, with the premium denim industry struggling it is more likely to receive a bid at the lower end of the range, Katz said in a note to clients.

Guess Inc , known for its namesake jeans, has resorted to discounting to clear excess inventory as shoppers look for good bargains.

The Wall Street Journal reported earlier that the company had fielded buyout proposals from private equity firms and apparel industry companies. ()

True Religion said it had formed a special committee comprising non-management directors and had hired Guggenheim Securities LLC as financial adviser and Greenberg Traurig LLP as legal counsel to assist in the review.

Guggenheim Securities and Greenberg were not immediately available for comment.

True Religion, founded in 2002 by CEO Jeffrey Lubell, made its mark with jeans that featured colorful reinforced stitching and oversized low flap pockets.

Sales soared over the decade as celebrities such as Angelina Jolie, Jessica Simpson, Megan Fox and Jennifer Lopez were seen wearing the jeans.

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

Yruma said he expected operating margins for 2012 to fall to 16.9 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 as well as 23 shops elsewhere.

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

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