True Religion’s CEO Michael Buckley not only went home again, but in his second tour at the brand he’s managed to reposition it for a wider audience and make it profitable once more.
The brand filed for Chapter 11 bankruptcy court protection in 2020 during the Covid-19 pandemic, a time when many fashion brands lost cash flow due to governmental mandates in connection with temporary store closures. The filing, the second one in three years, marked the dreaded Chapter 22 in bankruptcy parlance. The first filing for the premium denim brand founded in 2002 Jeff Lubell was in 2017, when the private equity owned firm found itself getting crushed under a hefty debt load. The company exited its first tour of bankruptcy and restructured its finances but didn’t solve all its problems on the creative or organizational side.
Buckley, who was the brand’s president during its heyday, re-entered the picture in November 2019, this time as CEO—but then the pandemic hit. Most companies at the Chapter 22 stage tend to fade away. Not True Religion, which was able to maintain its brand identity and restructure its debt load during its second bankruptcy process.
With a renewed lease on life, Buckley has been hard at work effecting a turnaround of the brand’s fortunes. This time, the creative and organizational side of the business seems to be in sync with the company’s financial structure. Here, Buckley talks about the new True Religion, how he and his team have repositioned the brand, and why it’s working.
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Rivet: Tell me about True Religion’s positioning in 2006 through 2010 when you were the company’s president. Back then, premium denim brands were the rage.
Michael Buckley: It was certainly the heyday of premium denim at luxury prices. I was president of True Religion, and it was one of the fastest growing and most profitable publicly traded apparel companies in the market. We were positioned in the luxury denim sector, really focused on attracting that $200,000-plus household income consumer. True Religion jeans then were priced between $200-$300 and were worn by countless celebrities and customers who shopped at upscale department stores like Fred Segal, Saks Fifth Avenue, Nordstrom and Neiman Marcus. Once I left the business, it became obvious that this consumer had changed dramatically.
Rivet: You rejoined the company in November 2019 as CEO and embarked on a repositioning of the brand. What changed? Was the premium customer no longer buying the brand? Was it because there was a lull in the denim cycle? Or were there other factors as play?
MB: When I left True Religion in 2010, the consumer was already beginning to change and by 2013 it was evident that the brand was struggling to evolve with it. The brand was trying to find its way to attract a luxury consumer. It had lost its way and was even struggling with the brand identity when the team got rid of True Religion’s iconic horseshoe and Buddha [logo]. We know that fashion, especially denim, is cyclical, and today denim is making a comeback. When I rejoined the brand in 2019, I was very focused on restoring the brand heritage while also understanding and reimagining its new consumer to drive growth. One of the first things I did was to bring back Zihaad Wells as creative director. We had worked together at True Religion in 2006 and he knows the brand’s image better than anyone.
Together with Zee, we got the product back to where it once was, with a nod to its past but an understanding of its future. We also undertook a survey to find out more about our customers. We discovered that True Religion appeals to a broad demographic range of diverse men and women from ages 15-60-plus. The average household income today is about $65,000. We believe there are over 150 million people in the U.S. alone that fit into the new True Religion demographic, which obviously gives us a much broader reach as a brand. Trust me, when we were selling $300 jeans in 2010, my audience was nowhere the size of what it is today.
Rivet: What is the average price point for True Religion now? How much of the product mix is denim-focused?
MB: It was imperative that we re-engineer the supply chain to reduce manufacturing costs so that we could drive gross margin and profitability. We adjusted our price points and are now selling products with an AUR of $79-$99 on jeans, $29 on T-shirts and $59 on hoodies. Although our garments are at a lower price point, True Religion is still a status symbol, and our consumers want a mix of jeans, T-shirts, hoodies and branded accessories at an affordable price. This price positioning penetrates 50 percent of the market share of the apparel industry as compared to True Religion’s previous luxury positioning that comprised just 5 percent of the apparel industry. Jeans make up about 40 percent of our sales, and I expect that to increase to 50 percent of the total merchandise mix soon. Our consumer base is roughly 60 percent men and 40 percent women.
I’d say that our new brand positioning is a success based upon the fact that we used to sell 2-3 million garments per year, and we are now selling in excess of 8 million. We have 3 million customers in our database, which continues to grow by double-digits. We’ve had some extremely successful collaborations this past year with Supreme and many diverse new influencers who truly reflect the values and lifestyle of our customers. Communicating in a relevant way to our customer base is the foundation of our marketing strategy, which has evolved from simply transactional communications to more emotionally connected messages and community support across social causes, small businesses and charitable causes.
Rivet: Is True Religion profitable?
MB: Yes, we’re one of the most profitable businesses in this sector and 2021 was a great year for us. We saw the True Religion business grow at a double-digit rate and finished the year with around $250 million in total sales and an EBITDA margin of approximately 30 percent. Improving our channel penetration mix has started to pay off. This past year, e-commerce has grown to 40 percent of sales, while wholesale and physical retail are at 30 percent. Over the next five years, our goal is for e-commerce to increase to 50 percent, with wholesale at 40 percent, and vertical retail at 10 percent.
Rivet: Why do you think we’re now back in a denim cycle? And to that point, what are some of the brand’s popular denim finishes, washes and silhouettes?
MB: We like to offer different silhouettes for everyone, whether they are skinny or slouchy. Like everything, the denim sector is constantly evolving and these cycles typically last between 3-5 years. We’re in the beginning of a new cycle, a very strong one, and I think part of this is due to the pandemic. We saw sweatpants make a comeback as people were forced to stay home; however as we all return to a new normal and go back to in-person workplaces and events, people are looking for new jeans and a reason to dress up.
We pride ourselves on being authentic and staying on top of trends while at the same time designing denim that reflects the original styles of True Religion. New processes that we’re seeing include brands relying on recycled denim and yarns as well as waterless washes and laser technology, which is a highly impactful and sustainable mechanism for developing denim these days. For us, we are leaning heavily into the culture of upcycling. It’s no secret that much of True Religion’s resurgence comes from those who are thrifting our original denim. What’s great is that it’s getting into the hands of creatives who are breathing new life into our denim, and we are partnering with them to provide additional support on a larger and wider scale. Our collaboration with Jaffa Saba was all about repurposing deadstock garments, while creatives like Elijah Popo and Madeline Kraemer are repurposing our denim to meet current trends and the desires of new customers. Additionally, this year marks our 20th anniversary—so we will be launching our Vintage Marketplace, an opportunity to reintroduce original product in one place and continue the lifecycle of some of our most popular silhouettes.
Rivet: Now that the brand has more accessible price points, are you sourcing differently from your first tour at True Religion?
MB: Part of my transformation strategy was re-engineering True Religion’s supply chain from the onset to reduce manufacturing costs in order to drive gross margins and profitability. Today, we source globally in Mexico, China, Bangladesh, India and Pakistan. This is quite different from when I was previously with the company, when 100 percent of the brand’s jeans were made in Los Angeles. We’ve been able to make garments such as tees, hoodies and joggers in North America and jeans in Mexico. If we need products quickly, a lot of our chase is from the U.S. or Mexico, where we can receive items in 45-60 days.
Rivet: How has True Religion’s distribution changed?
MB: A key component of True Religion’s growth strategy is a diversified distribution strategy. Like many brands, we’re seeing the most growth year over year through our e-commerce site, but wholesale and physical retail are both very important components to our overall growth strategy. We are in 4,000 wholesale doors globally, which include major retailers such as Macy’s, Dillard’s, Downtown Locker Room (DTLR) and Urban Outfitters. It’s vital that we continue to offer a rich in-store experience while also supporting our wholesale partners. One of our most prominent markets is our international business, and with very limited physical stores abroad, it is a necessity to make sure our e-commerce site supports all retail partners in the U.S. and overseas. We are a promotional brand today; however, this strategy works for us and performs very well in those retailers.
Rivet: True Religion’s store base is significantly lower today than during your first tour as president. Of total sales, how much volume is from your stores?
MB: When looking at our transformation strategy, reducing store count was a key component of this. Of total sales, 30 percent of our volume is in our 50 stores. We will look selectively at opening new stores in power outlet centers where our consumer shops.
Rivet: What about True Religion’s growth runway? What do you see as the major opportunities for the brand going forward?
MB: We are focused on our 5-year plan to get the brand to $500 million in revenues, really driving the growth of our e-commerce channel, which will represent half of the business. With this strategy, wholesale will represent 35-40 percent and our brick-and-mortar stores will represent 10-15 percent. Based on the 150 million-size of our addressable market, the size of our product range and the fact that our price points are where 50 percent of the $250 billion apparel and accessories market are sold at, we believe True Religion can grow to a $1 billion-plus revenue brand.
Rivet: Let’s talk about social media? What is the brand doing to attract and keep the attention of your targeted customer base? And what about the metaverse?
MB: How we show up in the digital sphere is ultimately backed by our audience wanting two things: branding and product in its most organic element. They want to see the brand on real people, which is why we prioritize user-generated content and influencer-generated content. Additionally, we tap young creatives to creative direct shoots for our drops and bring to life their perspective of the brand—allowing us to show our product on real people out in the world. We show up for a generation that is speaking for themselves and ultimately, we want to give them the partnerships they want, too. As far as the metaverse is concerned, it is something we are exploring but it’s also something we are not concerned with rushing. We want it to be impactful, and, of course, to amplify a cultural moment. However, we are not looking to jump on the trend for the sake of keeping the trend alive. Circling back, our audience is extremely vocal and if we don’t enter the metaverse in an authentic way—they will have no problem telling us.
Rivet: September 2021 saw the launch of the True Religion x Supreme collaboration. How did that come about, and will we see more collaborations in the future?
MB: Supreme works with brands that reflect their values of being unique and original, so we were honored when they reached out. That’s probably why the collection sold out in three minutes. They were supportive and enthusiastic about our Super T stitch, the horseshoe design, and the Buddha logo, all stapes in the True Religion aesthetic. Partnering with Supreme was an exceptional opportunity for True Religion to reach a new audience. The process was very simple, we helped design the product, and they controlled the distribution through their websites and stores. The partnership was such a terrific experience overall and served as a fantastic reminder of what made True Religion so special. We will continue to partner with the brands, designers, and influencers that are important to our consumers.
Rivet: What would you say keeps you up at night?
MB: What kept me up at night when I came back in 2019 was being able to transform True Religion into the amazing apparel brand I knew it could be. Now that we did that and are one of the most profitable apparel brands in the U.S. once again, I sleep great.