This evening, couture jean designer True Religion Apparel (NASDAQ:TRLG) will report Q3 2006 earnings. Park your acid-washed denims on that chair and check out the lay of the land, Fool.

What analysts say:

  • Buy, sell, or waffle? Ten Wall Street analyst firms follow True Religion nowadays, with five of them offering up a buy rating and the other four a hold. One does not have an opinion. In our Motley Fool CAPS service, 10 all-stars are bullish on the stock, with two peers on the bearish side of things.
  • Revenues. The average forecast among 10 analysts calls for $47.9 million of revenues, up from $35 million a year ago.
  • Earnings. Ten analysts agree that the company should produce about $0.44 of earnings per share, up from $0.33 last year.

What management says:
True Religion may have risen from the ashes of a failed mining operation once upon a time, and corporate governance looked sketchy at best in the early days. But things are looking much more shareholder-friendly now, as CEO Jeffrey Lubell has brought in outside help to make sure the business is run to its full potential. Recent additions include a lead designer hired away from Levi Strauss Europe and a marketing director with experience from Christian Dior and Yves Saint Laurent. New president Michael Buckley has experience with fashion denim after stints at British jeans maker Ben Sherman -- now a subsidiary of Oxford Industries (NYSE:OXM) -- and American counterpart Diesel, and the list goes on. This outfit means business now.

What management does:
Gross margins are still on the rise, a testament to the True Religion brand's pricing power and the benefits of the larger-scale manufacturing and distribution the company is enjoying. Operational and net takes appear to have hit a glass ceiling, as stock-based compensation and a couple of unfavorable legal settlements have taken a toll. But it's hard to complain about stable 18% net margins.

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

49.0

49.4

50.8

51.3

51.8

52.5

Op.

30.2

31.7

32.8

33.2

33.0

33.1

Net

17.3

18.4

20.3

19.0

18.8

18.0
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The main buzz around True Religion in the past few weeks has been about the move to hire Goldman Sachs (NYSE:GS) to "evaluate strategic alternatives." Is the company selling out to a larger corporation? Is Lubell taking the whole thing private? Or perhaps there's something less sinister going on.

One obvious strategic alternative is to stay the course as an independently run and traded company, only with business advice from the good folks at the financial powerhouse. If you put the announcement into the context outlined above, it seems to me that this management team simply has decided to do whatever it can to make the company into all it can be.

Lubell has said repeatedly that he wants True Religion to become a total lifestyle brand, beyond just the jeans, and the talent brought on board will help with that. Diesel is a good model for what Lubell wants to create, and Buckley helped create that brand. Goldman's advice and maybe some new funding ideas should help accelerate the process this time.

After a silent spring, there has been no shortage of press action from True Religion over the past quarter. This is a company very much in motion, opening branded stores, building its management team, and expanding into new product categories on nearly a weekly basis. You do these things when business is booming, and anything less than a "raise the roof" report tonight would surprise me greatly.

Competitors:

  • Polo Ralph Lauren (NYSE:RL)
  • Phillips-Van Heusen Corp (NYSE:PVH)
  • Innovo Group (NASDAQ:INNO)
  • Blue Holdings (NASDAQ:BLUE)

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Fool contributor Anders Bylund is a True Religion shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolishdisclosure looks great on you.