True Religion, the iconic Y2K-era jeans brand, is considering a potential sale as it experiences a resurgence in growth and profitability. After emerging from its second bankruptcy, True Religion saw a 20% increase in sales last year, reaching approximately $280 million. With $80 million in earnings before interest, taxes, depreciation, and amortization (EBITDA), the brand is attracting potential buyers who may value it at a mid single-digit multiple of its EBITDA.
The sale process began in January and has targeted consumer-focused private equity firms and large, publicly traded apparel companies as potential buyers. True Religion’s owner, Farmstead Capital Management, has hired Baird to oversee the sale process. While both Baird and True Religion declined to provide further details or comments on the sale, it is evident that the brand’s recent success has sparked interest in potential buyers.
True Religion is well-known for its disruptive impact on the jeans industry in the early 2000s. With its distinct signature stitching, embroideries, and logos featuring a smiling Buddha and horseshoe motifs, the brand quickly gained popularity. A-list celebrities like Jessica Simpson and Britney Spears were often seen wearing True Religion jeans during this time. Targeting female consumers with an average annual income of $200,000, the brand found its niche in high-end department stores like Neiman Marcus, Bloomingdales, and Saks Fifth Avenue.
However, True Religion faced challenges as the decade progressed. Increased competition from more affordable alternatives such as Gap and Forever 21 began to impact the brand’s sales. By the 2010s, denim was falling out of favor as athleisure became a dominant trend. In 2013, True Religion was taken private, and by 2017, it filed for bankruptcy. Yet, the brand managed to overcome these setbacks and emerged from its bankruptcies in 2020.
Under the leadership of CEO Michael Buckley, who returned to the company in 2019, True Religion has undergone a transformation. While staying true to its maximalist roots, the brand has adapted to the changing fashion landscape and tapped into the resurgence of Y2K-era styles. With a renewed focus on a diverse consumer base with an average income of $60,000 to $65,000, True Religion adjusted its price point to align with competitors like Levi Strauss and Gap, offering jeans for less than $100 per pair.
Buckley emphasized the importance of understanding the target consumer and adapting to their preferences. He highlighted that the previous management failed to recognize the shift in consumer behavior and continued marketing to an outdated customer profile. By conducting market research surveys, True Religion discovered that its Net Promoter Score, which measures customer loyalty, surpasses that of its competitors, including major brands like Levi, Nike, Michael Kors, and Ralph Lauren.
With this newfound success, Buckley envisions True Religion as a billion-dollar brand. His strategy for achieving this goal includes focusing on digital sales, expanding the product assortment, and winning over female shoppers. By doubling revenue over the next few years, True Religion aims to solidify its position in the market and capitalize on the current momentum.
As True Religion explores a potential sale, its recent growth and profitability make it an attractive opportunity for investors. The brand’s ability to adapt to changing fashion trends and resonate with a diverse consumer base bodes well for its future prospects. Whether True Religion remains an independent brand or becomes part of a larger apparel company, its journey from bankruptcy to resurgence serves as a testament to its resilience and ability to evolve with the times.
