How True Religion Got To Blue Jeans Heaven
Friday December 9, 7:00 pm ET
Lisa Schmeiser
Legend has it the first blue jeans were made to clothe miners during the California Gold Rush of 1849.
Now, in a twist, a former gold mining company has given birth to an upmarket jeans maker.
The Los Angeles-based company calls itself True Religion (NasdaqNM:TRLG - News). It's crafted its image around rock music and New Age flair, and its low-cut and embroidered denim products are tapping rich veins of profit in an upscale market.
Last year, True Religion's sales jumped more than elevenfold to $28 million from $2.4 million in 2003. This year, its sales are expected to top $95 million, the company says.
The four-year-old company's made money in nine of its last 10 quarters. Its earnings catapulted 1,600%, 800% and 560% in the first three quarters of this year. This is after posting its first profit in the third quarter of 2003.
How True Religion jumped from nothing to jeans heaven is a managing story with lessons for other entrepreneurs.
It started back in 2001 when a company named Gusana Explorations started up to mine gold.
Gusana never quite got off the ground and ended up a dormant public shell company.
Enter True Religion founder Jeffrey Lubell, who was looking for a way to finance a new denim products company.
True Religion Chief Financial Officer Charles Lesser says Gusana's shareholders sold the company to Lubell in June 2003. The company was then renamed True Religion and began trading under that name in January 2004.
The move paid off. True Religion has become the poster child for the premium denim market, where jeans routinely go for $200 and above. The company sells through high-end stores, but it recently opened its first company-owned outlet in Manhattan Beach, Calif., and plans to open a store in New York City in January.
Although the pricey jeans that True Religion makes are only a small cut of the $11 billion business for denim products, it's a lucrative one with lots of room to grow.
Industry tracker Cotton Inc. reports consumers who buy premium products have clothing budgets that are 63% higher than the average clothing shopper. They're willing to pay around $205 for a pair of jeans, and 88% of the largely female customer base is over 25.
Lubell launched True Religion after amassing plenty of smarts. In 1999, the 49-year-old entrepreneur launched Jefri Jeans and Bella Dahl jeans. Bella Dahl revamped vintage Levi's by sewing novel fabrics to the cuffs. He also was involved in other jeans ventures.
He says his experience taught him the jeans business. It also left him with an aversion for partnerships.
Of his prior business ventures, he said, "We were like scientists sending rocket ships to Mars, and they kept blowing up."
Undeterred, Lubell prepared to launch Guru Denim.
He slimmed down on the number of investors and partners he needed.
By 2003, he and close friend Gary Treisman had raised $1.5 million. They acquired Gusana Explorations and renamed it True Religion, and Guru Denim became a wholly owned unit.
Lubell says True Religion's success is all about the close, complementary relationship he's built with Lesser, the chief financial officer.
They've crafted a top-down management style that's given the jeans maker a seasoned, motivated sales and marketing force and a high-quality, offshore manufacturing base for its denim products.
Lubell calls himself an idea man, the one who can get inside the mind of an affluent consumer and who has a gut feeling for hot fashions.
Lesser, 59, has all the minute appreciation of a company's top and bottom lines that Lubell isn't necessarily good at.
"I am the visionary and the merchant, and Charles is the accountant," Lubell said.
Lubell and Lesser say True Religion owes its success to three things: a crack sales force, an insistence on keeping production in the U.S. for quality control and an intense corporate culture where long hours and visible rewards are the norm.
Lubell's experience in the jeans business taught him that the right sales force often means the difference between success and failure.
For Lubell and Lesser, the right sales force is a well-informed one that acts as a brand ambassador to the retail boutiques that stock the jeans. They must grasp the strengths of the firm's jeans and why the products may appeal more than those made by another vendor.
After Lesser joined True Religion in July 2003 and had been on the job three weeks, he fired the sales force. He quickly cast about for people who had experience selling high-end jeans to the boutiques and luxury stores where True Religion wanted to go. He and Lubell wanted salespeople knowledgeable about finishes, seams and other details.
One of their biggest sales coups was hiring veteran premium jeans saleswoman Jana Rangel as their chief U.S. sales representative. "She took Earl Jeans, where she worked before, from a baby company to $28 million in sales in a short period," said Lubell. So when Rangel expressed an interest in joining True Religion, "I knew we were poised for success," Lubell said.
"She is very proficient about who our competition is in the marketplace. She knows how to make the customers buy, how to get the best impact with the brand and how to retail it," he said.
Rangel takes pains to educate salespeople in boutiques, routinely holding how-to-sell clinics for any vendor stocking the company's jeans.
Lubell and Lesser believe True Religion's sales should be underpinned by its U.S.-only production.
Lubell says keeping production in the U.S. may mean higher costs. But he argues it saves money in the long run. "When you're 10,000 miles away from your factory and waiting six to nine months for a product, you better make sure it fits or else," Lubell said.
If you do production in the U.S., he says, the design and fit teams can visit the factory to keep an eye on the product as it's being made.
Anticipating customers' tastes seems to be crucial to maintaining the company's sales growth.
One danger is that denim fashion trends cycle quickly. The fabric-and-vintage jeans Lubell made popular with Bella Dahl dropped off the fashion radar four years ago. There's no telling how long True Religion's low-cut, close-fitting silhouette will appeal to shoppers.
Cotton Inc. trend forecaster Jessica Paruch notes premium denim customers aren't brand loyal so much as trend loyal. Premium jeans that are on the lagging edge of the trend curve quickly become today's second-hand clothes. They clog eBay and discount clothiers like Bluefly.com and Overstock.com.
True Religion offsets fickle denim tastes by moving into other apparel categories like knitwear. It's also broadening its customer reach. Lubell says the firm's striving to reach multiple generations of the same premium denim-wearing family.
"We're a lifestyle brand. (True Religion) started as a men's brand, then it evolved into women's, and then into kids," he said.
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