Question

Case 1–2: True Religion Jeans: Flash in the Pants or Enduring Brand?

Founded in 2002 by Jeff Lubell, True Religion had become one of the largest premium denim brands in the United States by 2012. Although True Religion made its debut in upscale department stores and trendy boutiques a decade earlier, the company owned 86 full price retail stores and 36 outlet stores in the United States as well as 30 stores in international markets by the end of 2012. The company’s domestic retail store business accounted for about 60% of revenues and 64% of operating profit before unallocated corporate expenses in 2012. Just five years earlier, the U.S. retail store segment generated only 17% of sales and 25% of operating profit before unallocated corporate expenses.

Jeff Lubell’s vision of the company had come true—at least partly. The company had transformed itself from a jeans designer into an apparel retailer with it own brand à la Buckle and Diesel. At the same time, True Religion had managed to shift its product mix so that sportswear accounted for almost 35% of sales in its company-owned stores. Lubell felt these two ingredients were critical to establishing True Religion as a “lifestyle brand.” The ultimate in product differentiation, many companies attempt to create so-called “lifestyle” brands that transcend product category and inspire deep consumer loyalty. Lubell felt becoming a lifestyle brand was the key to insulating True Religion from the inevitable fluctuations in fashion trends.

Moreover, True Religion’s sales had grown at an average annual rate of almost 22% from 2007-2012. The company’s return on invested capital was an impressive 27% and its return on average assets was 12% in 2012. Despite these factors, press articles and analyst reports on True Religion described the company as, “the struggling maker of premium denim.”1 A New York Post article entitled “Escape From Hell for True Religion” described private equity firm, TowerBrook, as the company’s “savior,”2 when the company announced it had been acquired by TowerBrook in 2013. Other denim brands, such as Jeff Rudes’ J Brand, appeared to be usurping True Religion’s position as the “must have” denim brand for young consumers.

What had gone wrong at True Religion? Was the change in ownership the answer to the company’s problems? Was premium denim destined to go the way of Flash Dance legwarmers and Crocs as fast fashion from the likes of H&M became more mainstream? Private equity investors had snapped up stakes in both established and up-and-coming premium denim brands in the past five years—leaving just one publicly traded premium jeans maker, Joe’s Jeans. Should investors stay away from the industry?

Answer 1

1. Let's First discuss about the adverse things happened with "True Religion"

• Market get changed due to fierce competition, due to which price of product get down.
• True Religion failed to adapt its prices to align with consumer expectations (In this market its all about product and prices)
• With so many products available through a multitude of channels, and with consumers armed with mobile technology, shoppers are able to find the products they want at prices they’re willing to pay – in nanoseconds.
• Consumers were no longer going to pay hundreds of dollars for the styles True Religion was offering, and the company learned this too late.
• Because of which, company constantly tried to cut down the cost of product which affects the quality of product and that's why consumer switch to another brands and market share of "True Religion" gets constantly down.
• In the month Jul'2017, "True Religion Apparel Inc." filed for chapter 11 bankruptcy Protection.

2. Is Change in Ownership was answer to company's problems:

• Understanding the designs the customer wants and the prices he or she is willing to pay. It sounds easy, but it requires a systematic approach and the ability to use data in decision-making, which is a Role of Owners of company.
• In my view change in ownership was good option for company. because there are so many entrepreneurs turning out shiny new technology solutions that promise to solve what is wrong with retail.
• Here are some approaches that retailer should consder:
  • Pricing Optimization
  • Customer Insights
  • Crowdsourcing, Machine Learning, and AI
  • Inventory Control

3. Should Investor Stay away from the Industry:

• In order to improve its outlook, the company plans to "close or consolidate underperforming store locations, and renegotiate lease terms" in order to save money.
• Another cornerstone of the restructuring plan is to "invest in growing our digital footprint," CEO John Ermatinger said in a statement.
• True Religion may have a second chance. The company said that it has reached a proposed deal with lenders to slash True Religion’s debt by over 70% as it continues operating. It will be interesting to watch whether and how they change their strategy once they emerge from bankruptcy.

Note: In case of any question or suggestion feel free to ask.