True Religion, Universal Denim – Ultimate Lifestyle

Speaker 1:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Oliver Chen:
My name is Oliver Chen. I'm TD Cowen's new platforms, retail and luxury analyst. In this episode, we're joined by True Religion Apparel, an iconic global denim and lifestyle brand known for its distinctive stitching, old design, and deep roots in music and street culture. It was founded in the US and the brand has reestablished relevance with a new generation of customers. Today, we're excited to welcome True Religion Apparel CEO, Michael Buckley. Michael Buckley is a leading retail and consumer products executive with over 40 years of industry experience in both growing brands and creating value. He realized over 1.5 billion in value creation for investors in his career and he served as a CEO of True Religion since November 2019. He also orchestrated the sale of True Religion to private equity firm ACON Investments in 2024. Michael, how would you describe where the True Religion brand stands today? And what does the turnaround actually look like in the numbers?
Michael Buckley:
Well, the simplest way I could describe it is it's a fundamentally different business than the one you probably remember, call it from 2006 to '12 when we were a publicly traded company. Last year we did $470 million in revenue, up 25% from the prior year with $124.5 million in adjusted EBITDA and the business throwing off roughly 95% free cashflow conversion. EBITDA has compounded additive 45% annual rate since 2020. This is not a turnaround story anymore. I mean, this is absolutely a growth company. Getting huge organic attention from people like Kylie Jenner, Alix Earle, Naomi Osaka, all of which was not paid for. I mean, these people are naturally coming and posting about True Religion. Fast company named us one of the brands that matter in 2025. Highsnobiety ran a cover story on the comeback. The cultural momentum and the financial momentum are happening at the same time, which is something real that is going on here.
So the numbers in particular are compelling in particular on the margin side. As a company, gross margin is now above 70%. So that's blended between e-comm stores and our wholesale business. And that's up from roughly 60% historically. EBITDA margin is approximately 26%, which puts us above most of the publicly traded apparel accessory peers out there. So we're not buying growth here, I mean, we've actually, as we've scaled the business, we've become more profitable as we've grown.
Oliver Chen:
Very impressive. So Michael, what about the brand today and the cultural relevance that you've created? What does the brand stand for now relative to what it stood for or how has it evolved staying true to the roots, but being fresh with new generations as well?
Michael Buckley:
The brand today, I mean, it's a lifestyle apparel and accessory company. We started out as a jean company. Today, jeans are about 38% of what we do. 62% is what we call sportswear, which is hoodies, joggers, t-shirts, outerwear, dresses. I mean, you name most of casual apparel classifications, we're in it. We also do about 12 different accessory classifications. So to me, it is a complete lifestyle, apparel and accessories brand today. And a very accessible one. My average unit retail out the door blended across all those product categories is $30 to $80. That's very different than selling a $250 jean the way we did years ago. The customer shifted as well. Once upon a time, we were selling a... 15 years ago, it was a $250,000 household income, Nordstrom, Neiman Saks, Bloomingdale's type shopper. Our core customer today, which is about 81% of the customer, is 18 to 45 years old.
61% are ethnically diverse and 70% earning under $85,000 a year. So it's a much larger audience than we've ever sold before. We refer to us as this is an urban casual customer. I mean, some people say this is the Ralph Lauren of the urban casual or for the urban casual consumer. They want quality, they want style, they want authenticity. But with True Religion, the horseshoe, the stitch, the Buddha, our other iconic marks are what this customer aspires to have. And today we've given them the ability to have it by giving them a full range of product and giving it to them at prices are where massive volume is done.
What hasn't changed is the emotional connection people have with this brand. A lot of celebrity following. We have a big following with a lot of music people, in particular on the hip hop side of the marketplace and getting stronger. In addition to a lot of organic following. I mean, Kylie Jenner, 400 million followers wearing True Religion and talking about how this brand is back really helps us remain relevant out there with this consumer we're targeting today.
Oliver Chen:
That's been very exciting. And the whole lifestyle movement is what make brands iconic. How did you navigate becoming a lifestyle brand into these multiple categories? What were some of the principles you followed to make that happen? Because not every brand can be a lifestyle brand.
Michael Buckley:
Yeah. I mean, I think even way back when I ran the business, I was the president of the company from 2006 to '10. And my mission was always to... We knew we had to diversify beyond jeans. And one thing that people resonate with is our iconography. That stitch and particularly even the horseshoe design, if you look at Ralph Laurent as an example, that pony on all of his products means status. For True Religion, that horseshoe or our use of stitch or our Buddha, it means status to this customer.
So as we introduced initially, it went from jeans to jeans and t-shirts. And then it went to hoodies and joggers and then it went to shorts and then it went to dresses. And today it's pretty much I'll do puffer jackets, I'll do pleather jackets. We'll do other pieces of nylon outdoor and everything has that horseshoe on it or some type of stitching on it, which resonates with this consumer and they want to buy it. I mean, I do probably a hundred million dollars at retail in women's handbags. And it's all a product that is on trend product, but it has our horseshoe on it and retails well.
Oliver Chen:
Michael, you've had decades of experience and we talk now about the TikTokification of retail, the importance of mission and also thinking about sports, gaming, culture, women's sports, Olympics. What do you think about today's customer and the needs and how to be culturally relevant now versus what you've seen decades past?
Michael Buckley:
I mean, at the end of the day, you have to know who your consumer is. And one of the first things I did when I walked back in within my first two months in 2019 was to understand this consumer, understand what they like, understand what moves them from a social media perspective, who do they like in terms of music culture, sports culture. And we serve in love with what they want.
We have an influencer program called Team True that we have professional athletes in there, both on the male and the female side. We have influencers in there, we have micro influencers up to people that are up and coming people in the music space. In addition too, we use pretty substantial faces in our seasonal campaigns. We just use Megan Thee Stallion. We've used a whole list of people over the years, Jada, Key Glock, YG, Quavo, India Love, Sexxy Red. I mean, we're getting all of these people that are relevant at the time and it resonates well with our consumer.
Oliver Chen:
Another really big aspect you and I have seen is just this transformation of the channels and also the apartment store channels just transforming as we speak. What are your thoughts on the channel mix of the future? What are you seeing? And direct to consumer is obviously very important as you think about having conversations with your customer.
Michael Buckley:
Well, channel mix to us is important. It's always been important. I mean, way back when, when I first came to this brand, I guess it was 20 years ago, it was a wholesale business and we wanted to control our own destiny. And at that time you did it with retail stores. So today our business is 39% e-commerce and e-commerce means truereligion.com. I'm not including what I do on some of our wholesale partners, .coms, Amazon, Macy's, et cetera. We have 56 retail stores today. That's about 24% of our business. They are highly profitable. We average 45% full wall within the fleet. Our wholesale business, which is in probably 6,000 locations, does about 35% of sales. That mix we have today is kind in the realm of where we want to be long-term. E-commerce is 39%. We'd like to see that get to 50% or certainly somewhere between 40% and 50%. But as we grow stores.
We just brought on a new head of retail who took another chain from 300 to 800 stores. We believe within our, what we'll call medium-term horizon here, the next four or five years, we can go from 56 stores to 150 in North America. Our strategy with stores is we put those stores where this consumer shops. It could be, I'm in New York, I'm in Kings Plaza, I'm in Queens Center, I'm in Newport Center, Jersey City, I'm in Woodbury Commons. So it is the identical store. We don't have a full price store concept and an outlet store concept. It's one store concept. They're two to 2,500 square feet, same product, same window, same mannequins, same pricing structure, highly successful. Our stores averaging $700 plus some of them even like $1,500, $2,000 per square foot. And like I said, the fleet averaging 45% full.
So obviously retail, important. Wholesale, we're in fantastic retailers out there, Down Town Locker Room, Pacsun, Tillys, Zumiez, Urban Outfitters, a lot of the big chains out there Buckle, Macy's, Dillard's on the full price side. And we know our consumer. We know our consumer wants a deal. We do a certain amount of business with the off price guys as well. But wholesale is important to us and our penetration, like I said, we're in 6,000 doors, but our penetration per door is still tiny when we look at sales per door as compared to where we think it can be long term. We expect all of those to grow. I mean, this year the business will do somewhere between $525 and $550 million and we believe it gets to a billion dollars over the next four or five years while each of those channels grows.
Oliver Chen:
And Michael, what about the store of the future? What kind of stores excite you most from the brand? How do you make the brand look the best possible in terms of lifestyle execution and this whole notion of experiential retail as well as really endearing loyalty with your customers?
Michael Buckley:
Yeah. I mean, hey, at the end of the day, we continue to move on our mission of getting these people... When we open the store, we have very strong metrics in terms of when we open a store within that 10 or we go 10 to 30 mile radius. What does that do to our e-commerce business? What does that do to our wholesale business?
And what we see is as we open those stores, both of those businesses, my e-commerce business, and my wholesale business expands as I open a new door. And what's happening is the consumer's going in that store, they're seeing all our images, all the campaigns we do, all the seasonal images, they'll see that. They'll see all the product that we do. They get the experience with the staff within the store. And to me, we're a brand that is about product, but ultimately also about marketing to things that are relevant to this consumer today. And walking in that store and seeing our images with Megan Thee Stallion and YG and Key Glock and some of the other people that we've used, I think resonates well with this, call it 18 to 45-year-old consumer.
Oliver Chen:
As you think about your business, you've also had a lot of success with women's. Women's is about half after being less than a third prior. What drove that shift? And for those that are less familiar, what does your brand stand for when you speak to horseshoe, Buddha, and the stitch? What do people think about when they think about your brand?
Michael Buckley:
Well, let me answer you the first part of that question on the women's side. I mean, when I came back, once upon a time, this business was 60% women's. And when I came back, it was $42 million. And it really had not been focused on. We immediately brought on a completely new design leadership, merchandising leadership on the women's side. We've grown that business last year of the $470 million, $200 million that was on the women's side of the business. And we believe that will continue to grow. I mean, our vision is that we get women's back to 60% of the total business over the next five years. Women shop, we know that. They shop for themselves. They also shop for their husband, boyfriend, significant other, children. So that is usually important to us.
I mean, even today... Once upon a time, we set the trends. We created the Big T, we created the Super T. We created the wide leg and the twisted leg, the flaps. We don't create trends today. We follow what's happening from a trend perspective. We know our consumer is, they're not the early adopter, they are more of the mainstream mass audience. There's 110 million people in our TAM today. When we were selling $300 jeans 15 years ago, our TAM was less than... It was probably in a 10 to 15 million people's zone.
So we are giving them the product that they want at the price that they want. On the women's side, we make sure... We use the expression, we need to be first to be second. And that resonates well with this customer. We don't miss a trend. We see things out there, we will immediately chase it. We work with factories, we'll get the goods in here, immediately get a read within our own e-commerce, then our stores and wholesale channel and we'd have a very, very successful business.
Oliver Chen:
Oh, that dovetails well into denim and what's happening. I'm still a skinny, but wide leg I like too. A lot's happening with looser and also low rise as well as mid and high. But what are the most important denim trends you're seeing today across fits, washes and rises, and how are you positioned within that context?
Michael Buckley:
Yeah. I mean, like I said, today, True Religion, we were that super premium brand. I mean, today we are focused on making sure that we're covered with all the different silhouettes. The market changes. I mean, people say, "Oh, Skinny is going away." Skinny's never going away. Boot came back, flare came back, baggy came back. As a brand that has a heritage in denim or in jeans, we make sure that we're covered in all the different silhouettes, whether they be leg openings or baggy fits or low rise or high rise. We just make sure that we're offering that. And we also make sure we are in all these categories. I mean, like I said, jeans are 38% of our business. We're going after within all the categories that we go after across men's and women's at this, call it $30 to $80 AUR, we're going after over a hundred billion dollars of volume.
Years ago when we sold $250, $300 plus dollar jeans, then it was a $2 billion industry. Today, that's probably a $1 billion industry, the over $250 jean market. So when we look at this business, it's like we offer a wide on trend product offering across men's and women's and we offered a price points where half of the apparel and accessories are sold at in this country. So our vision isn't, "Hey, we want to get this to a billion dollar brand." We believe long-term this should be a multi-billion dollar brand.
Oliver Chen:
And Michael, we've seen unprecedented changes in supply chain and volatility is a new normal. What are your thoughts on testing, reading, and reacting, and also managing some of your portfolio in terms of breadth versus depth?
Michael Buckley:
Do you mean from a product perspective?
Oliver Chen:
I'm curious about both. And it's just fashion has been so fast, and also as you've become more lifestyle, the complexity of your supply chain goes up.
Michael Buckley:
Yeah. I mean, today we have a quite large design and merchandising team as well as sourcing team. We are in multiple factories on each classification we do on the apparel side. Accessories, some of them we do ourselves, some of them we use licensed partners and then we resell the product through our own DTC. The business has gotten much more complex, call it from 15 or 20 years ago when we made jeans in Los Angeles.
Today I have a sophisticated team here. They all come from multi-billion dollar brands, and we've been able to build the business and scale the teams and cover all these categories and do it well. When tariffs hit, we bring all our goods in on a landed duty paid basis. Last year we did $470 million and I took a $2 million tariff hit. So we were able to work very well with our suppliers to mitigate those tariffs. And we also raised our prices $3 on some items. This is on MSRP, $3 on some items, $5 on some items, and $10 on a couple of items. Effectively, we raised our gross margins because we offset the tariffs so much.
Oliver Chen:
What's the hardest part of your job?
Michael Buckley:
What's the hardest part of my job? Just continuing to bring top talent to the organization. As we scale, some people are great to get you from say $200 million to $500 million. Sometimes the people that take you to get from $500 million to a billion might be a little different. Or some people are able to grow with the scale. And sometimes you got to bring in leadership that is scaled businesses of that size. I mean, we recently this week made a change on the... We believe e-comm should be the biggest channel. It has been the biggest channel. We want it to continue to be the biggest channel. We believe our business should be a... If we get to a billion, we'd love to be 500 million on truereligion.com. So we this week hired an executive that had taken urbanoutfitters.com from $300 to $700 million, went on to PVH, went on to Foot Locker.
That's the caliber of people. If we're getting to a billion on people that have run a billion, run two billion without building armies of people underneath them, but helping us scale from where we are to where we are times two or three. And that's critical. To me, this business is all about people and product. And the right people on the team in merch and in design and in other areas working with us, listening to the consumer will help us get to the promised land.
Oliver Chen:
We've always thought of True Religion as having a great fit and material. I wear all my laying American Eagle as well as Levi's. I'm kind of full and Margiela too, but I'm kind of democratic about my approach. Well, who is your competition? NM is very competitive as a market and she's mixing and matching. She's mixing Chanel and Shein as you know.
Michael Buckley:
Yeah. I mean, first of all, we don't consider ourselves a denim brand. I mean, yes, our heritage was in denim or is in denim, but again, denim is 30% of our business. Our customer, we know who they're buying because we survey who they're buying. We look at brands on the urban casual side. They're like logo driven. This customer's buying Ralph Lauren, this customer's buying Nike, this customer is buying Fashion Nova. This customer's going into some of those big retailers, the JD Sports of the world. They're buying Adidas. They're buying other logo driven. On the denim side, are they buying... Maybe they bought the higher-end side of the woman side, they might be buying Good American, Levi's for sure, American Eagle to a lesser extent, certainly not buying Mother and Frame and these other $250 denim brands that we might've competed with 15 years ago.
Oliver Chen:
On the financial algorithm, getting a billion dollars, what are the things we should know about on the path here? It sounds like you're well on your way. And international would be interesting to hear about too, given that the brand has global resonance.
Michael Buckley:
Yeah. Well, like I said, let's look at the business overall. So e-commerce, biggest channel, we want to keep it as the biggest channel. Massive opportunity from a conversion rate perspective. We're converting at less than 2% today. I mean, this business is owned by, in addition to our management team and ACON, there's other investors in this business. American Eagle's an investor in this business, that. We know what other retailers are doing in terms of conversion rate. To me, it's a massive opportunity for us to raise that conversion rate at the same time, bring more and more people into the funnel every day and get that e-com business from, call it circa $220 million to $500 million over the next four or five years. Stores, we believe there can be a lot more stores. It'll be, call it 25% to 30% of the overall business, but we believe we can take it from 56 to 150 over the next four or five years, certainly with the performance that those stores deliver now.
I mean, 45% full wall is pretty phenomenal in this industry. And we will continue to open stores and continue to look at the... We look at the right store size, we look at the right economics. All our deals have kickouts. We de-risk as much as possible as we roll out retail. And we brought on very substantial experts that have rolled out the head of retail and the head of retail operations, both rolled out hundreds of stores from a chain that already had hundreds of stores over the last, call it, 10 years. So stores important. Wholesale, we're in 6,000 doors. We're scraping the surface quite honestly in terms of a sales per door perspective. I got 15 categories that we're selling across men's and women's and there's big opportunity for us to go deeper into each of the wholesale doors. So when you roll it all up, that business is circa 95% of the business coming out of the US.
International is a white space, and in the early days of the brand, we set up subsidiaries all over the world that proved to be incredibly costly and we won't go down that path again. We have our own sub in Europe. We have distributors or licensees or franchisees in a number of other countries. Our goal is to get that business to 20% of the total over the next four or five years, which we know is still small when we look at some of our peers out there that are doing 30%, 40%, 50% of their business internationally.
Oliver Chen:
Is this, there's abundant opportunities, What's limiting your growth or is there a limit or you do have to be careful in terms of execution risk as well as discipline. So curious on the puts and takes around the speed of growth.
Michael Buckley:
I mean, this year, like I said, we're courting now $525 to $550 million, then getting... Growing this business at $100, to call it $125 million a year and getting us to a billion over the next four or five years I believe is very achievable. I mean, we've been growing it at circa 100 million a year for the last couple of years. But again, it's about right people executing, making sure that we obviously don't let costs get out of control, whether it be product costs, SG&A costs. We don't sign bad leases. We spend about $40 to $45 to acquire a customer online. We don't want to see that go through the roof. I mean, we have a CAC to LTV ratio of nine times, which is pretty fantastic. We want to continue to grow it, but we want to make sure our metrics don't change or certainly don't change for the negative.
Oliver Chen:
Yeah. I teach a class at Columbia Business School on customer lifetime value as well. That's a very important angle. I mean, how are you thinking about new customers versus existing? And then what's your philosophy for building awareness and marketing dollars or marketing as a percentage of sales?
Michael Buckley:
So marketing, I'm a huge believer that we got to continue to invest in this brand. Even though we deliver a 26% EBITDA, we spend 10% of total sales on marketing. And about 70% of that money is spent on growth marketing. So obviously what we're doing to acquire new customers through the social media channels and affiliate programs and search engines, what have you. And then we spend a significant amount of money on brand marketing and we will continue to. I mean, when I came back here, the company was spending like four or 5% on marketing and it just once we fixed everything and we got the supply chain right and we got the margins right, we put the pedal to metal on marketing to drive this business. So we're spending 10%. Our plan is to continue to spend 10% as we continue to deliver 26 plus percent EBITDA as the business grows from $550 to a billion.
Oliver Chen:
Which part of this business is the most fun to you?
Michael Buckley:
Growing it. I mean, I love that. When I look at the brand, it's a phenomenal brand. And obviously I came back here and there was a lot of challenges that I walked into. And the biggest challenge was they didn't know who the consumer was. Today we have seven or eight million people in our database, whether that be email addresses, cell phone numbers, social media followers, people that are on our app, what have you. We're going after TAM it's $110 million. So when we look at this business, I'm like, "We could be multiples of the size that we are." When we look at the big guys out there, the Levi's and the Tommy's and Calvins and the Adidases of the world, I mean, these guys are all five plus billion dollar businesses.
We believe even a fashion nova, which is only online, 90% women's is a over two and a half billion dollar business. This certainly we believe can be a multi-billion dollar business, especially considering I'm only selling seven... I only have seven million people in our database. How do I get that to 15 million people, then 20 million people and 30 million people?
Oliver Chen:
Well, how do you do that? How do you do that? Do you open restaurants?
Michael Buckley:
You got to stay relevant with your product, you have to be on trend with product and you have to be relevant to them from a marketing perspective. What are we serving up in terms of influencers? Just everything that resonates with this consumer, how are we continuing to get the right people in front of it? Even at the talent that we do use and pay for, they have to be relevant to this consumer today. We don't want people that were hot five years ago. We want people that are trending today.
Oliver Chen:
Well, I guess, Michael, I mean, I've spent a lot of time on this topic, like cultural relevance. How you get those people up today? You've been in this business for 40 years. Is it different today finding who's relevant or not really?
Michael Buckley:
No. I think if you have the right people on the team, you're going to be able to figure out who's relevant out there, who's up and coming out there. You got to listen to the young generation. You got to listen to what they want. I don't necessarily always listen to the management team here because the management team here sometimes isn't exactly the target consumer. What's happening on TikTok?
Oliver Chen:
So what do you think the young generation wants?
Michael Buckley:
Well, I mean, obviously they want a lot of different things out there, but they're telling you what they want by what they're watching and listening to on social media. Some of the artists that are popping today, we want to get in bed with those people. We have other big names that love this brand that we're about to sign deals with.
Oliver Chen:
What have been the biggest surprises to you perhaps of what young people want today relative to maybe what you expected? Because you really do your work figuring this out, but we don't know all the answers, you have good people behind you.
Michael Buckley:
Obviously, product drives this brand the most. But this consumer today is very smart. They know what things should cost.
Oliver Chen:
Transparency.
Michael Buckley:
They can go to [inaudible 00:29:49] and get a similar item. It won't be True Religion, but they can get a similar item. They go to Fashion Nova and get a similar item. So they know what they want. We look at ourselves as a unlike a $10 price premium to a Levi's on a pair of jeans, out the door, not like we were years ago where I was triple the price of a Levi's. So we make sure that we give this consumer the product they want. If certain things are trending, whether it's crystal t-shirts or oversized T-shirts for men or what have you, we make sure we're giving them what they want, but we have to make sure we give them at the price they want to pay for it. And that means we have to source it right so we can work on our very strong margin structure.
Oliver Chen:
Of the value proposition as well as transparency.
Michael Buckley:
Absolutely. You see everything online today. There's no pulling the wool over this customer.
Oliver Chen:
Yeah. It's been exciting, but it's harder, but that's life, it's like the way the world works. And what about the health of the consumer today? What are you seeing with trade-owns or signs of resilience?
Michael Buckley:
The health of the consumer today, I mean, I look at our business having grown the business call it 25% a year for the last couple of years. Even this year we know that we're well going to exceed the guidance budget forecast that we put forward. I think is there pressure on the consumer side in terms of gas prices in terms of other things? Yes. My only assumption would be, I mean, we're throwing up 7% same store sales growing in a tough environment. I mean, that's not easy. I can only assume it would be better if there wasn't some macro issues like gas prices.
Oliver Chen:
Who are you taking share from because you've had such a nice momentum?
Michael Buckley:
Like I said, all the big guys that we compete with, the logo-driven guys, the Nikes, the Adidas, the Levi's, the Fashion Novas, the other major players out there, the Michael Kors and Tommy and Calvin, we're taking market share from all those guys.
Oliver Chen:
Yeah, Michael, it's been really fun and awesome to hear the new story and what's happening and also what you've continued to build and all the growth drivers ahead as well as your approach to lifestyle branding and thinking about investing behind the brand as well as offering a clear value proposition with trends right and culturally relevant marketing as well. Thanks for your time, Michael.
Michael Buckley:
Thank you very much. Appreciate your time, Oliver.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.