Unlike Other Luxury Brands, True Religion Apparel Profits Without Discounting
by Christina Lee on March 4th, 2009
Recently reported sales of True Religion have made the denim brand an anomaly in the luxury market, perhaps even a worthy investment once retail sales pick up, an analyst reported.
Net fourth quarter sales totaled $73.0 million, a 38.5 percent rise from 2007 sales of $52.7 million; while sales in its U.S. wholesale segment rose by 14.4 percent to $36.4 million.
True Religion still prices its jeans at a retail price as high as $363, to consumers in more than 50 countries. The most likely reason why actually stems from its target consumers: likely young singletons who consider denim a worthy splurge if not an investment piece.
Not much differently than with other luxury apparel brands, analysts predict that True Religion is hardly recession-proof. However, this brand in particular is still well-positioned, said value investor Todd Sullivan.
“Should the macro-environment show no visibility as the year progresses, one would assume True [Religion] shares mirror that. But as soon as I see strength in the macro condition…if shares sit near where they are not they will be almost irresistible,” he said in Seeking Alpha. “It would be a ’sin’ not to buy them in that case.”
Other luxury apparel brands have had to discount heavily – if not rewrite their sales strategies entirely to survive the economic environment, as Vera Wang did.
Rather than pricing her apparel upward from the costs, Wang is instead allowing retailers create price targets, or the amount they think customers are going to pay, as The Wall Street Journal reported on Feb. 21.
This is only the latest step Wang has taken to sell to the general public, as she now holds ten goods licenses that have generated about $350 million at wholesale.
True Religion also has far fewer locations to where they distribute – just 42 specialty boutiques and major department stores, compared to the 169 full-line, discount, boutique and clearance stores that Nordstrom manages.
Nordstrom has also had to work lower prices into its most recent sales strategy – though for this company, this means opening ten discount Rack stores, in comparison to just three full-line stores, over the next year.