True Religion's Denim Disruption Strategy

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2:38We spent a lot of time talking about big companies today. We covered OpenAI, Amazon, NVIDIA, Nokia. A lot of companies. And more. A lot of the tech space, too. Kind of want to zoom in a little bit on one of the smaller companies that we talk about. Are you wearing jeans? I had to look. I am wearing jeans, yeah. Are you? Me too. I am wearing jeans, yeah. Me too. Okay. But it's like a secret. We wear jeans a lot now. Yeah. I wear jeans all the time now. We're talking jeans. We're talking jeans. Because we've got Michael Buckley with us, the CEO of True Religion. He joins us from Gardena, California.

3:06So everybody knows True Religion. The company began back in 2002. It was publicly traded for a few years. It was taken private back in 2013. Earlier this year, Akon Investments took a majority stake in the company. Michael, you've been there for quite some time as CEO for, wow, six years at this point. um before we i want to ask you how businesses i want to get an idea of the consumer but because you're a private company can you we don't have access to all the numbers that you know we do with public companies can you just throw us a few numbers contextualize for our audience the size of your business right now yeah this year we're going to be just short of about 500 million dollars in revenue.

3:48And that's we've doubled it over the last four years. And it's the most profitable it's ever been in the 22 year history. Wow. And I don't know if you guys know, but I was here the first time, so to speak. I was the president of the company when it was public. And I was here from 2006 to 2010. So what are you able to do now as a private company that's allowing you to be more profitable than you were back as a public company when you were president? You know, clearly the first thing you got to really understand in this business is who's your customer. So when I came back in 2019, the first thing I did was a consumer survey to really understand.

4:25I thought I understood who the customer was, but I wanted to really understand who the customer was from what it was called in 2005 to 2012, when we were selling a high income Nordstrom, Neiman Sachs, Bloomingdale's early adopter customer. So I did a survey and it came back very clear, men and women, 15 to 50, the core being like 20 to 40 years old, African-American, Latino, white, Asian, all races, but about 65 ,000 household income, which is clearly it's the American average, but it's a lot less than the consumer that was paying$300 for a pair of jeans at the beginning of the brand's history.

5:05Yeah, I mean, it's funny. Like I was thinking about how many different brands of jeans I have in my wardrobe. And I've like gone all in on jeans in the last couple of years. And it's it's there's lots of choices out there. But price point does matter, right? Like, so how do you think about, Michael, like how you guys differentiate yourself? Yes, you can have a name and a brand, but I feel like there's more at play. Yeah, I mean, I think for us, I mean, first of all, just to set the land in terms of what this brand stands for today, we're about 40 % jeans. So of the$500 million, we're doing 40 % jeans and 60 % in what we'll call sportswear.

5:42So I sell millions of T-shirts, hoodies, joggers, button-down shirts, dresses, skirts, you know, all apparel classifications in addition to a number of accessory classifications. classification. So, you know, for us to be relevant, I mean, knowing the customer, we know what the customer wants in terms of product. We know what the customer is willing to pay. And by reinventing the supply chain of the company, we're able to give the customer what they want at the price they want. And quite frankly, our prices today, you know, it could be anywhere from, you know,$69 to$110 for a pair of jeans. It could be$19.99,$29.99,$39.99 for a hoodie or a t-shirt.

6:19You know, we're positioned at price points where half of the 250 billion in apparel and accessories are sold at today. Now, you compare that to years ago when we sold$300 jeans, which was literally only a couple billion dollar business. So today, the brand has the ability to have a much more wider appeal based on the size of the audience that we're going after, as well as the price points that we're able to hit for this consumer. Talk to me about your supply chain. And where are the products made? We make them all over the world. I mean, once upon a time, we made everything in Los Angeles. And then eventually that shifted to Mexico and South America.

6:56Do you make anything in L.A. anymore? We might do a couple items fast chase, but predominantly it's 99 percent in other markets outside the U.S. OK, sorry, I cut you off, but you were talking about the other countries that you're in. Yeah. So we're in China. We're in Cambodia. We're in Vietnam. We're in Bangladesh, India, Pakistan, other countries, you know, Guatemala and some countries in South America. Tiny, tiny bit out of Mexico. So it's pretty diversified today. Surprised to hear China for a couple of reasons. One, I thought the apparel manufacturing wasn't as big as it has been traditionally because that economy really has shifted to higher tech, but also because of tariffs.

7:40And, you know, we knew the trade war in the first Trump administration. sort of was a warning to many companies that that were manufacturing in China to find somewhere else to do it. What what do you do in China right now and why are you still there? Well, first of all, there's tariffs everywhere. I mean, I think now there are now there are. But in the first Trump term, they were they were there was no so-called liberation day. True. I mean, today we do a lot out of China. We do a lot out of other countries. You know, like some of the suppliers out of China are very good in terms of making apparel.

8:16They are very quick. They have the ability to do more fashion compared to other countries that are doing just more basics in mass volume. Hey, Michael. And we've worked with our. Oh, sorry. I'm sorry. No, no, no. Please continue. You know, we've worked with our suppliers. We literally work with our suppliers to our design team will work with the suppliers to be able to bring the product in the quality we want, the details we want at the cost we want. and whether that's China or other countries out there. So we've been fortunate partnering with these factories during Liberation Day and beyond. And we've mitigated, you know, almost, I don't want to say almost all, but probably 90 % of the tariff impact that we've mitigated with partnerships with these factories.

8:59Hey, one thing I want to ask you about is marketing. And I know you guys just rolled out your holiday plan or holiday campaign. I'm thinking of, you know, how much we talked about American Eagle and Sidney Sweeney and, you know, the provocative, you know, having good genes and so on and so forth are great genes. I mean, that got so much momentum. The president even commented on it. So tell us about the marketing, you know, spend. How much that is crucial to your growth strategy? It's tremendously crucial. I mean, you know, it wasn't the first thing we invested in when I came back. I mean, I had a lot to fix in terms of supply chain, in terms of really building, building out the product, really getting women's back to 50 percent of the business.

9:40But we invest heavily in marketing today. We spend about 10 % of our turnover. So this year, it's, you know, circa$50 million we'll spend on marketing and we'll continue to spend at that level to get the, you know, we want to make sure that we're relevant to this consumer that we know is our customer. And it's important. You know, we just launched our campaign with Sierra. You know, we've done other major campaigns with people that are relevant today. Megan Thee Stallion, Anita, Sweetie, you know, Quavo, India Love, you know, lots of people that are relevant to this consumer today. So it's incredibly important for us to continue to invest in the right talent that makes this brand relevant to this consumer.

10:20So, I mean, I know you can't give us any names about who you're thinking about, but how would you describe the individuals you've worked with or the brand image that you want to convey? I think that they work perfectly for who our consumer is. We have a very diverse consumer. and the success of this business. I mean, literally, since we really started to invest heavily in marketing over the last couple of years, like I said, we've doubled the size of this business as we've ramped up the marketing spend to close to 10 % of revenue. So the people we pick resonate well with the consumers that we know are the demographic target of this brand.

10:54So you're known for jeans, but as you mentioned to us, that's now less than half of your business. The biggest area of growth from an apparel perspective, what is it? I mean, we're in a lot of categories. We're in button-down woven shirts. We're in sweaters. We're in outerwear. We just need to go deeper in those categories. I mean, we believe long-term, you know, having started as a jean company, jeans will be circa 40 % of the business. But the growth of the brand is really going to come from us just selling more of these other classifications as well as selling, you know, a lot more jeans. You know, the price points that we sell at today, like I said, over half of the$250 billion apparel and accessories are sold at.

11:33And the addressable market of this brand is around 120 million consumers today versus 10 million consumers when we were selling$300 jeans. So, you know, we believe, I mean, our path is to get to a billion over the next four or five years. But we believe long term this should be a multi-billion dollar brand, you know, like the Levi's, Fashion Nova's and other Tommy's, Calvin's of the world. What's the best channel for selling? You've got stores, you've got online, you've got, you know, partnerships, whether it's at, you know, various, I don't want to say, you know, department stores. You know, what is the best or where's the growth?

12:13The growth is everywhere. I mean, the business today is, let's call it circa 45 percent coming from TrueReligion.com. And then the balance is evenly split between 56 of our own brick and mortar stores, which are highly profitable. I mean, it's 45 % full-wheel EBITDA model within our stores. And the balance is, I'm in 6 ,000 wholesale locations in North America, and I'm in another 1 ,000 wholesale locations outside of North America. So we're in the Macy's and Dillard's and downtown locker rooms and PacSun's, Tillie's, Zoomie's, Urban Outfitters, Buckles of the World, plus a lot of independent stores, as well as major and mid-sized retailers outside the U.S.

12:56as well. So owned by private equity, obviously, there should be a payday for private equity. That's what they're expecting. You were at the company when it was public. Is the plan to take it public again?

13:08You know, obviously, it's private equity owned. I mean, at some point in time, private equity always wants to monetize. I mean, I enjoyed running a public company. You know, it's really up to them what they want to do with it over time. All right. You know what we want to know? You're wearing jeans, I assume, right? Of course, I'm wearing jeans. I have my suit and tie on here, or my suit and my white shirt on. But yes, I'm wearing True Religion. All right. Just checking. Hey, listen, stay in touch. Let's know how things are going, especially as we get into that all-important holiday shopping season.

13:40Michael Buckley, he's Chief Executive Officer of True Religion, joining us from California.

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17:02When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At The Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at the Hartford.com slash risk mitigation.

17:37Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut.

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