The hedge fund that owns True Religion is exploring a sale of the Y2K-era denim brand as it returns to growth and profitability after emerging from its second bankruptcy, according to CNBC.
True Religion’s sales jumped about 20 percent to about $280 million last year and it generated $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, said the people, who spoke on condition of anonymity because the discussions are private.
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, owner of True Religion, hired Baird to handle the sale process.
Baird and True Religion declined to comment on the sale.
True Religion, best known for disrupting the denim industry in the early 2000s with its signature stitching, embroidery and smiling Buddha and horseshoe logos, has been on a roller coaster ride for the past decade or so.
When it hit the Los Angeles fashion scene in 2002, consumers embraced the maximalist styles from brands like Von Dutch and Juicy Couture. True Religion’s flashy jeans have become a staple among A-listers like Jessica Simpson and Britney Spears.
At the time, jeans sold for about $200 to $300 a pair, and True Religion found its niche among female consumers who made about $200,000 a year and used to shop at department stores like Neiman Marcus, Bloomingdales and Saks Fifth Avenue. said CEO Michael Buckley.
True Religion went public in 2003 and made headlines for its growth and earnings. But as the decade wore on, it faced increased competition from cheaper alternatives such as Gap and forever 21.
By the 2010s, athleisure was taking off and denim was starting to fall out of favor. The brand went private in 2013 and by 2017, it was bankrupt.
True Religion eventually emerged from that bankruptcy and did so again in 2020 after filing for a second time at the height of the Covid pandemic. However, these days, the brand’s trips to Chapter 11 are in the rearview mirror.
Buckley, who headed the company during its 2000s heyday and returned in 2019, has turned True Religion into a leaner machine. The brand still focuses on its maximalist roots, but has reached a new consumer as Y2K-era styles make a comeback.
True Religion’s primary buyers are diverse with an average income of $60,000 to $65,000. Its standard price for jeans has dropped to less than $100 a pair, which is in line with competitors such as Levi Strauss and Gap, and is a better fit for its clientele.
“You have to know who your consumer is. The previous administration, before I came back, was still trying to market to who they thought the customer was in 2010,” Buckley told CNBC during a recent interview. “Well, they went off brand. There are a lot more followers out there [today] than, you know, the early adopters who wanted that brand back then call it.’
True Religion recently conducted market research and found that its Net Promoter Score, which measures customer loyalty, is more than 10% higher than all of its competitors, including mega brands like Levi’s, WinMichael Kors and Ralph Lauren.
Buckley said True Religion has the potential to be a billion-dollar brand. In the coming years, it plans to double its revenue by focusing on its digital sales, expanding its product range and winning over female shoppers.
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