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's sales rose about 20% to about $280 million last year, generating $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 sales process began in January and the sellers have approached 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 lead the sale process.
Baird and True Religion declined to comment on the sale.
True Religion, best known for revolutionizing the jeans industry in the early 2000s with its stitching, embroidery, and smiling Buddha and horseshoe logos, has been on a rollercoaster ride for the past decade or so.
When it emerged on the Los Angeles fashion scene in 2002, consumers were adopting maximalist styles from brands like Von Dutch and Juicy Couture. True Religion's statement jeans became a staple among celebrities like Jessica Simpson and Britney Spears.
At the time, jeans sold for $200 to $300 a pair, and True Religion found its niche catering to female consumers who made around $200,000 a year and tended to shop at high-end 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 profits. But as the decade progressed, it faced increased competition from cheaper alternatives such as Gap and Forever 21.
By the time the 2010s rolled around, athleisure was taking off and denim had begun to fall out of favor. The brand went private in 2013 and by 2017 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, Today, the brand's journeys through Chapter 11 remain in the rearview mirror.
Buckley, who ran the company during its heyday in the 2000s and returned in 2019, has transformed True Religion into a more efficient machine. The brand still focuses on its maximalist roots, but has reached out to a new consumer as Y2K-era styles make a comeback.
True Religion's top buyers are diverse, with an average income of between $60,000 and $65,000. The typical price of jeans has dropped to less than $100 a pair, which is in line with competitors like Levi Strauss and Gap, and more suitable for their customer base.
“You have to know who your consumer is. The previous administration, before I came back, was still trying to market who they thought that customer was in 2010,” Buckley told CNBC during a recent interview. “I mean, they made the mark. There are a lot more fans out there. [today] of those out there, you know, call them the early adopters of this brand back then.”
True Religion recently conducted a market research survey and found that its net promoter score, which measures customer loyalty, is more than 10% higher than its competitors, including mega brands like Levi's, NikeMichael 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 assortment and winning over female shoppers.
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