True Religion explores a sale as maximalist, Y2K-era styles make a comeback

Business

A True Religion brand storefront.
True Religion

The hedge fund that owns True Religion is exploring a sale of the Y2K-era jeans brand as it returns to growth and profitability after emerging from its second bankruptcy, CNBC has learned. 

True Religion sales jumped about 20% to around $280 million last year, and it brought in $80 million in earnings before interest, taxes, depreciation and amortization, people familiar with the matter said. 

It’s unclear what valuation True Religion is seeking, but it could sell for a mid single digit multiple of its EBITDA, the people said.

The sale process began in January and the sellers have targeted a wide range of consumer-focused private equity firms and a number of large, publicly traded apparel companies as potential buyers, the people said. 

Farmstead Capital Management, True Religion’s owner, has hired Baird to run the sale process. 

Baird and True Religion declined to comment on the sale.

True Religion, best known for disrupting the jeans industry in the early 2000s with its signature stitching, embroideries and smiling Buddha and horseshoe logos, has been on a rollercoaster journey over the last decade or so. 

When it emerged on the Los Angeles fashion scene in 2002, consumers were embracing maximalist styles from brands like Von Dutch and Juicy Couture. True Religion’s flashy jeans became a staple item among A-listers like Jessica Simpson and Britney Spears. 

At the time, the jeans retailed for about $200 to $300 a pair, and True Religion found its niche catering to female consumers who made about $200,000 annually and tended to shop at high-end department stores like Neiman Marcus, Bloomingdales and Saks Fifth Avenue, CEO Michael Buckley said.

True Religion went public in 2003 and made headlines for its growth and profits. But as the decade wore on, it faced increased competition from cheaper alternatives such as Gap and Forever 21.

By the time the 2010s hit, athleisure was taking off and denim had started to fall out of favor. The brand was taken private in 2013 and by 2017, it was bankrupt

True Religion eventually emerged from that bankruptcy and did so again in 2020 after it filed for a second time at the height of the Covid pandemic. However, these days, the brand’s trips through Chapter 11 are in the rear-view mirror. 

Buckley, who helmed the company during its 2000s heyday and returned in 2019, has transformed True Religion into a leaner machine. The brand still focuses on its maximalist roots, but has dialed into a new consumer as Y2K-era styles make a comeback. 

True Religion’s primary shoppers are diverse with an average income of $60,000 to $65,000. Its typical price point for jeans has come way down to less than $100 a pair, which is in line with competitors like Levi Strauss and Gap, and better suited for its customer base.

“You have to know who your consumer is. The previous management, before I came back, was still trying to market to who they thought that customer was in 2010,” Buckley told CNBC during a recent interview. “Like, they left the brand. There’s a lot more followers out there [today] than there is, you know, call it the early adopters that wanted this brand back then.” 

True Religion recently conducted a market research survey and found its Net Promoter Score, which measures customer loyalty, is more than 10% higher than its competitor peer set, including mega brands like Levi, Nike, Michael Kors and Ralph Lauren

Buckley said True Religion has the potential to be a billion-dollar brand. Over the next few years, he plans to double its revenue by focusing on its digital sales, expanding its product assortment and winning over female shoppers.

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