Market spotlight: True Religion

NEW YORK (AP) -Despite the widespread weakness among retailers, $200 jeans are selling briskly for True Religion Apparel Inc.

During the first quarter, the Vernon, Calif.-based company's profit jumped 35 percent, as domestic and international sales soared. True Religion also hiked its 2008 profit and revenue outlook. According to Thomson Financial, the company's results were better than Wall Street estimates three times in the most recent four quarters.

Wedbush Morgan Securities analyst Jeff Mintz upgraded the stock to "Buy" from "Hold" and called the company's new outlook "conservative," expecting stronger sales on the Web and in stores.

Why the unusual success? True Religion's customers are mostly "aspirational." They don't mind paying top dollar for jeans most people can't afford, says Robert Chwatko, an analyst at Beech Hill Advisors, a money management firm.

The jeans have strong brand recognition, and are worn by celebrities such as Britney Spears, Jessica Alba and Denise Richards. The distinct stitching and style are quickly recognizable, Chwatko says.

The company has been expanding from department stores to its own stores in top markets like Los Angeles and New York, planning to open at least 10 more stores by the end of 2008. True Religion is also beginning to explore opening stores abroad.

Brean Murray, Carret & Co. analyst Eric Beder says the locations have performed above expectations.

"New denim styles and the rollout of a number of key licensed lines have ignited sales and driven material traffic," says Beder, who rates the stock "buy."

Wedbush's Mintz noted that the company's non-denim and licensed product represented about 28 percent of first-quarter revenue in its consumer direct business.