The Rise and Fall of True Religion…How it Happened
You might remember True Religion from the signature horseshoe shaped logo stitching
on the back pockets of your jeans back in the 2000’s. There are not many brands
whose story can be associated with such a rollercoaster ride. But if there was one,
then it had to be True Religion. In today’s business world, brands and companies
are expected to experience dips and spikes in their journey. In the case of True Religion,
their path was anything but linear. True Religion, which started as a denim
jeans seller, roared in the clothing market for the initial years and tripled their revenue
each year for the first four years. Later, the brand obnoxiously fell apart. It’s fair
to say that the brand has seen extreme dips and extreme spikes in its journey.
In this video, I’ll dive deep into True Religion's brand story and provide you with the Company
Insight on the right and wrong that happened with this brand. But before we begin, if you guys enjoy
videos like this, please click the LIKE button, subscribe button and notification bell to know
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2000's - The launch and rise of True Religion True Religion launched itself as a denim brand
in 2002 and soon caught the attention of too many eyeballs for their jeans. Jeffrey Lubell,
who is considered an industry veteran, co-founded this brand along with his wife, Kym Gold.
In the mid-2000s, denim and jeans went hand in hand, and this exact combination still
performs as the best choice in the fashion industry. Back then, the brand was a mere
representation of its founder, Jeffery Lubell, who was into music, meditation and peace.
It clearly showed in the brand's logo, which was a smiling Buddha holding a guitar.
That particular logo created some trouble, and different communities pointed it out
and with that soon their iconic horseshoe logo was introduced.
In 2002, the brand launched itself in America while being headquartered in Manhattan Beach.
Back then, their designer jeans stood apart in the crowd and people loved it.
Their classic jeans with five pockets are their bestselling piece of clothing to date, and people
who lived through the 2000’s in L.A. can recognize those jeans as a fashion statement. The craze of
those five-pocket jeans and super T stitching brought sales in huge numbers. To help cope with
the demand, True Religion even had to opt for a different type of sewing system which helped
them manufacture more clothing in America. Their initial breakthrough came in 2004 when
the brand made sales worth $7 million in Q3 and soon 2004 became their first ever profitable year
with $4 million dollars in profits. Jeffery credited this success to his established
distribution and licensing deals which happened in Japan, Canada, Italy, Spain, Germany, Australia,
and New Zealand, thus creating an international network in the first year of the brand’s launch.
This strategy accounted for approximately half of the company's annual sales. Back then,
this approach was promising and practical. To notch it up a bit, True Religion took
their jeans to multiple specialty stores and made them stand out as a unique piece of apparel.
In America, True Religion had made a name for themselves and with all the hype it created
from launching in just a few department stores, they eventually sold out in many
regions. The prices of their jeans were never meant for low-end buyers. In 2004, the retail
price of their jeans was $465, and they never dropped their prices. Asked about this in 2005,
Jeffrey said in an interview with WWD. "It's not about the price point. If you want to buy
a price point, you go to Wal-Mart and Target." As a year, 2005 was nuts, as the brand’s profits
spiked and the Company made over $100 million in profits. True Religion opened its first
retail location, a 900-square-foot boutique in Manhattan Beach, California. Soon, they became
the talk of the town, and people looked at this brand as premium wear and bought those overpriced
jeans and t-shirts. In August 2005, True Religion was listed on the NASDAQ stock exchange.
After the mid-2000s, the brand earned invaluable exposure through multiple celebrity attires,
film inclusions, and fashion magazine mentions from Elle, Vogue and Bazaar. The brand was seen
on Madonna, Gwyneth Paltrow, Bruce Willis, among a host of other celebrities, including the entire
cast of the Desperate Housewives. At that time, the road ahead looked promising for the brand.
In 2007, sales climbed to $160 million, and the brand's overall market cap increased to
$500 million. The business strategy to target the luxury market and keep products in the price range
of $100-$300 was working well. Meanwhile, they were not just selling jeans anymore. The Company
regarded itself as a sportswear brand too and in the process landed a few sponsorship deals.
Now, within its first five years, True Religion was available in 900
branded boutiques and multiple specialty stores like Von Maur,
Nordstrom, Bloomingdales and Saks Fifth Avenue. The brand was very well recognized
globally and was available in 50 countries and six continents around the world.
Bad Investments and a shift in consumer behavior led to the first fall
Despite the great financial recession in America in 2008,
True Religion was standing firm in their business, and in that year they invested $2 million in
a national consumer advertising campaign. The primary purpose of this significant investment
was to increase brand awareness and make people buy into their newly launched jeans which were
priced lower than their usual skinny jeans. This investment turned out to be a big flop,
and True Religion turned its back towards the big Asian market, which promised sales and growth.
As they say, everything comes in bundles and it happened with True Religion as well.
By the end of 2011, True Religion saw a slight decrease in their profits for the first time.
This was the first hiccup experienced by the brand in terms of understanding the market and their
audience. We can consider this phase as the start of a major fall in True Religion’s brand growth as
they seemed to spend money in the wrong places and lost focus on their own consumer market.
But in the background, more serious changes were happening to consumer preferences. In 2008-2010,
people started to become more health-conscious in America and adopted healthy lifestyle habits.
As a result, yoga pants and gym wear were high in demand. Even people who didn’t exercise wanted
to be seen in healthy attire. Soon the $319 skinny jeans everyone wanted were replaced by Lululemon's
$98 yoga pants. True Religion didn't have any clue on how to compete with their rivals, not because
of the impact created by their competition, but because of the revolutionary change in consumer
behavior towards luxury clothing. Internal chaos and private
equity drew the way for Bankruptcy Despite some tough decisions made after 2007,
Jeffery Lubell kept the company profitable and surprisingly increased its revenue by 55 percent
in 2011. But internal board members weren't happy with Jeffery's approach and his attitude towards
growing the brand. Even though Jeffrey had 20 years of experience in the textile industry,
he had always been criticized for his past where his previous two clothing lines that he co-founded
with his wife filed for bankruptcy. Meanwhile in 2010, Mike Egeck, who served
as the President for True Religion and had good experience in working with brands like North Face,
stepped down from his position. This move made True Religion unstable internally as Jeffery and
Mike shared a good relationship with each other and grew the company steadily into a global brand.
Later, investors and significant board members saw Jeffery as a leader who didn't follow any trends,
and they knew the company could fall short if it didn't react according to the market changes.
In 2012, the board declined renewing Jeffrey’s contract as Creative Director of the company.
With that, he went on a search to find a buyer for his company.
Later in April 2013, Jeffrey stepped down from the company and got a $6 million severance package.
Many say that this was the breaking point for the brand because True Religion struggled to keep up
after Jeffrey was gone. But in reality, by the time of Jeffrey's exit, the brand was already
behind in the game of adapting to new consumer culture and changes in their brand preferences.
In the middle of 2013, TowerBrook Capital Partners, an investment management firm,
acquired True Religion for $835 million. At that moment, True Religion’s common stock
was priced at $32 per share. It was said that investors who bought shares for 67 cents in 2004
had gained 4,776 percent on their investment in just nine years. With the investment,
TowerBrook got a 52% stake in the company and True Religion was taken off the Nasdaq.
TowerBrook was ambitious to run such a big apparel brand with a loyal following,
and they hoped to leverage the brand's cult name for better business.
By the end of 2013, True Religion recorded annual revenue of $490 million. But everything changed
from that year onwards; particularly the category of jeans saw sales decline due to the high demand
for athletic wear. Brands like, 7 For All Mankind, Joe's Jeans, and Hudson saw an 8 percent decrease
in their sales as well. Instead of buying from high priced big brands, American consumers
traded down to lower-priced brands like Levi's and fast fashion like H&M and Forever 21.
This was certainly something which True Religion was not prepared for, and they were too late to
adopt to this 'athleisure' clothing trend. Despite having over 100 retail stores in the
middle of 2016, True Religion saw no profits and no growth for their jeans and denim clothing.
The worst part here was that True Religion never really changed itself into a brand for the modern
consumer. Way back in the 2010s, when Amazon was starting to thrive in the U.S., True Religion
never launched into the eCommerce space. They believed in the old brick and mortar stores, which
had worked for them for a decade. But the reality was that people got used to online shopping,
and it shifted their focus to trust and buying online rather than from a physical store.
Back then, the world saw a massive rise in global eCommerce sales. Brands, like True Religion,
that stuck with their business model of selling higher-priced products in regular
retail stores and boutiques struggled. Due to the evolution of eCommerce and online shopping,
people were no longer willing to buy expensive stuff from more prominent brands,
especially in terms of clothing. This shift in consumer behavior was seen because an average
internet user could now compare the prices of any item with the click of a mouse and can choose to
buy products from brands within his or her budget. The target market of True Religion,
which was the Millennials and Gen Z's, are the most sophisticated online shoppers after all. And
to add to that, there were a growing number of problems with knock off counterfeit and replica
jeans that closely resembled True Religion jeans being sold online for a fraction of the price.
True Religion really struggled at growing their digital assets, and by the time they
hopped onto the online world of business, it was almost too late. There were already established
brands that were selling the same clothing at very competitive prices. Thus, it became
harder for True Religion to convince people into buying their clothes at 2-3x higher prices.
In 2014, True Religion launched a #BeSoBold campaign on social media.
In response, the brand was criticized for its overpriced clothing on the
internet and it was clear that True Religion was left behind in the game.
Their internal teams, from marketing to operations, were failing at each step. Over time,
they lost their grip in connecting and building a better relationship with their audience.
In 2016, True Religion bore a loss of $78 million and filed for Chapter 11 bankruptcy in Delaware.
With the bankruptcy, True Religion wiped out $350 million of its $535 million in total debt in
exchange for about 90 percent of equity, and it no longer was owned by TowerBrook. After filing for
Bankruptcy, the President and CEO John Ermatinger said in a statement that, "By dramatically
improving our capital structure 24 months in advance of our term loan maturity, we will
continue business operations as usual and provide our employees and business partners the long-term
stability they need, while providing the necessary flexibility to invest in growing our digital
footprint, building connections with customers, and improving organizational competencies".
No doubt this was the ultimate fall for the brand 'True Religion,' and people never expected it
to rise and be the same brand as it was in the mid-2000s. This bankruptcy was a perfect example
of how older brands lost focus of their consumers by neglecting to adapt to newer technologies,
newer trends, and misunderstanding the consumer behaviors of online shoppers.
True Religion's promising revival but then another bankruptcy
Within one year, the company responded to the Bankruptcy by changing CEOs, cost-cutting,
re-focusing product range, and by taking extra measures. In 2019, True Religion was showing
some promising signs of exiting Bankruptcy. But by that time, many had almost forgotten that the
brand even existed as the denim market became more and more saturated than ever before.
Back in the 2000s, consumers were buying denim jeans at price points of $300
and above. However, by 2019, jeans were becoming cheaper and cheaper. And with the quality of lower
priced jeans improving, it became harder and harder to justify paying such a huge difference
for the premium jeans made by True Religion. True Religion hired digital agencies to expand
their digital ventures. Soon, their marketing strategies were starting to show results
and the brand was profitable again. But as things started to improve for True Religion,
2020 happened and the COVID-19 pandemic hit hard. With the lockdowns everywhere,
department stores were extremely vulnerable and sales plummeted across the board. True Religion
shut their stores for months and couldn't keep up with the operating costs. Since the company was
under private ownership, they decided to file for another bankruptcy in April 2020 due to COVID.
In October 2020, True Religion issued a press release that they had exited their second
bankruptcy. They had managed to reduce their store count further from 87 stores to 50 stores,
cut staff and lowered operating costs and their debt load. And with those changes,
the True Religion emerged as a profitable, lean operating company with a healthy balance sheet.
And that brings us to today. True Religion still needs to
take giant strides to reinvigorate and recapture its iconic American brand.
At this moment, they’re focused on growing one step at a time, which is quite understandable.
Do you think True Religion will be able to rise again from the COVID pandemic? If you were the
CEO at True Religion, what would you do now? If you have any other thoughts about True Religion,
whether it be about their business or their jeans, leave it in the comments.
I’d love to hear what you have to say. So with that said, thank you so much for
watching. There was a significant amount of work and research that went into making this
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it would really help out a lot. Thank you again for watching.
https://fairlyvalued.com/company/TRLG