According to sources familiar with the matter, the hedge fund in possession of True Religion is contemplating selling the iconic Y2K-era jeans label as it experiences a resurgence in growth and profitability following its emergence from its second bankruptcy.
True Religion witnessed a remarkable 20% surge in sales, reaching approximately $280 million last year, and generated $80 million in earnings before interest, taxes, depreciation, and amortization.
Although the desired valuation for True Religion remains undisclosed, insiders suggest it could fetch a mid-single-digit multiple of its EBITDA.
The sale process commenced in January, with the sellers targeting a broad spectrum of consumer-focused private equity firms and several prominent publicly traded apparel companies as potential buyers.
Farmstead Capital Management, the owner of True Religion, has engaged Baird to oversee the sale proceedings, while both Baird and True Religion have opted not to comment on the matter.
True Religion, renowned for its disruptive influence on the denim landscape in the early 2000s with its distinctive stitching, embroideries, and iconic Buddha and horseshoe logos, has navigated a tumultuous journey over the past decade.
Initially making waves on the Los Angeles fashion scene in 2002, True Religion capitalized on the maximalist trend embraced by consumers, competing with brands like Von Dutch and Juicy Couture.
Its flashy jeans quickly became a must-have item among celebrities like Jessica Simpson and Britney Spears, retailing for approximately $200 to $300 per pair.
Following its public debut in 2003, True Religion garnered attention for its rapid growth and profitability.
However, as the 2010s unfolded, the brand encountered heightened competition from more affordable alternatives, such as Gap and Forever 21.
The rise of athleisure further compounded the challenges for denim-focused brands, leading True Religion to go private in 2013 and eventually declare bankruptcy in 2017.
Despite enduring two bankruptcies, True Religion has emerged stronger, with CEO Michael Buckley, who spearheaded the company during its heyday in the 2000s and returned in 2019, implementing significant transformations.
While retaining its maximalist essence, True Religion has adapted to a changing consumer landscape, particularly as Y2K-era styles resurge in popularity.
Targeting a more diverse consumer base with an average income of $60,000 to $65,000, True Religion has adjusted its pricing strategy, offering jeans priced below $100 to align with competitors like Levi Strauss and Gap.
Buckley emphasizes the importance of understanding evolving consumer preferences, asserting that the brand’s recent market research indicates higher customer loyalty compared to industry peers.
Looking ahead, Buckley envisions True Religion as a potential billion-dollar brand and aims to double its revenue in the coming years by bolstering digital sales, expanding product offerings, and appealing to female shoppers.
