True Religion (TRLG) jumped over 20% in a day last month on word that the company was looking into strategic options that could include a sale of the company. The company has a small overseas presence and little online retail activity, and a buyer with those capabilities would find TRLG of great value given the synergies and added upside to the current merchandising strategy that online and global growth could provide. Other companies are interested, and Citigroup issued a report saying the retailer could draw as much as $35 a share in a takeover, which would be another 35% above current prices.
This is a bit of a turnaround play with a decent 3% dividend to collect while the turnaround occurs and we see if there is a buyout. The company got too aggressive in changing its fashion line for the spring and summer season. They realized their mistake and are committed to a better balance between new fashions and well-liked core styles, and they are trying to have more of those classic styles in the stores for the all-important fourth quarter.
I believe the company is now headed in the right direction, and while the new efforts and takeover buzz play out, I really like the strong balance sheet and 3.1% yield. TRLG is up 14% since we talked about it in late August, and I would definitely hold if you own it. If you don’t, don’t chase it at current prices and instead look to grab it on pullbacks under $24.