KeyBank Dec 9 HOLD - Consumer Industry Research True...

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Consumer Industry Research True Religion Apparel, Inc. (TRLG-NASDAQ) True Focus on Retail Growth: Coverage Initiated with a HOLD Rating December 9, 2010 Edward J. Yruma (917) 368-2394 [email protected] Charu Sharma (917) 368-2276 [email protected] For important disclosures and certifications, please refer to page 27 of this document. KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC
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KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC Equity Research Page 2 of 27 December 9, 2010 Contents AT A GLANCE ..................................................................................................................................................... 3 SUMMARY AND RECOMMENDATION .............................................................................................................. 3 KEY INVESTMENT POINTS ................................................................................................................................ 3 VALUATION ......................................................................................................................................................... 4 RISKS ................................................................................................................................................................... 6 EARNINGS OUTLOOK: MID-TEENS EPS GROWTH IN 2011 ........................................................................... 7 INITIATION CHECKLIST = HOLD ....................................................................................................................... 9 COMPANY HISTORY ........................................................................................................................................ 10 DENIM BRAND STRATEGY .............................................................................................................................. 10 NON-DENIM BRAND STRATEGY .................................................................................................................... 12 KEY NEAR-TERM CATALYST: U.S. RETAIL SEGMENT ................................................................................ 14 Strong Retail Segment Sales ............................................................................................................................................ 14 E-Commerce ..................................................................................................................................................................... 14 Highly Productive Store Base ........................................................................................................................................... 14 Outlet Channel .................................................................................................................................................................. 14 KEY NEAR-TERM CATALYST: U.S. WHOLESALE ........................................................................................ 16 Majors ............................................................................................................................................................................... 16 Boutiques .......................................................................................................................................................................... 16 Off Price ............................................................................................................................................................................ 17 New Direct Sales Model ................................................................................................................................................... 17 KEY LONG-TERM GROWTH CATALYST: INTERNATIONAL ......................................................................... 20 International Wholesale .................................................................................................................................................... 20 International Retail ............................................................................................................................................................ 20 LICENSING SEGMENT ..................................................................................................................................... 21 PRODUCTION PROCESS ................................................................................................................................. 22 Design ............................................................................................................................................................................... 22 Manufacturing ................................................................................................................................................................... 22 MANAGEMENT .................................................................................................................................................. 23
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