SECTOR: ConsumersSECTOR: ConsumersCOMPANY: True ReligionCOMPANY: True ReligionSR. ANALYSTS: ANNA BRAETJR. ANALYSTS: AMANDA CANNIZZIO, BRIDGET EASTES, MOLY FANG, JONATHAN GARNICK,, IMRAN HOSSEIN, JENNY KWONG, LESLIE MULLINGS, PRADEEP MAHTANI, ANDREW WALTERS

Investment RecommendationInvestment Recommendation

2

Company

Recommendation BUY

Current Price 23.31

1yr Target Price 31.79

% Upside 36.4%

Key investment drivers– 1. International Expansion– 2. Movement to Consumer-Direct-based Business Model– 3. Attractive Comparables

Premium Brand Denim & Premium Brand Denim & Apparel IndustryApparel Industry

The Premium Brand Denim & Apparel Industry consists of companies that design, manufacture, and distribute high-end apparel and accessories through distributors and company retail stores, with a specialized focus on luxury denim products to be sold to young-adults with high discretionary income.

3

By Revenue Industry Market Share by Revenue

True Religion True Religion Company SnapshotCompany Snapshot

4

Market Cap Revenue Beta Gross Margin EBITDA EPS P/E

570.42M $311M 1.72 63% 84M 1.75 10.8

TRLG Value ChainTRLG Value Chain

Outsource Production

to U.S. (denim),

Mexico, Asia

Raw Materi

als

In-House Distributio

n Showrooms (CA and

NY)

Direct from TRLG to Customers Brande

dRetailers

Department Stores & Boutiques

Licensing Accessory Manufacturers

International ExpansionInternational Expansion• Headquarters: Switzerland, Japan, South Korea, Hong

Kong, Germany• Joint Venture with German Distributor UNIFA Premium– Reduce Distribution costs

04/10/23 BU Finance & Investment Club 6Source: Company Filings

TRLG ExpansionTRLG Expansion

04/10/23 BU Finance & Investment Club 7

• 101 stores in 5 years• Saturation around 1000

stores • Expanding faster than

competitors – VFC: 50% marketing

on sportswear– BKE: not abroad– GES: approaching

saturation

Source: Company Filings

Total Store Openings:

Movement to Movement to Consumer DirectConsumer Direct

04/10/23 BU Finance & Investment Club 8

Motivations:• Department

stores• Profit margins• Premium Brand• Maintain >30%

gross margin

Movement to Movement to Consumer DirectConsumer Direct

04/10/23 BU Finance & Investment Club 9

Benefits:• Display space• More control• Avoid wholesale

pricing• Maintain >30%

gross margin

Attractive ComparablesAttractive Comparables

04/10/23 BU Finance & Investment Club 10

Gross Margin

Sales per Square Foot

4th Qtr Same-Store Sales

Growth

Inventory Turnover

63% $1818 7.2% 3.83

16% $428 6.3% 5.64

47% $6691 -6.0% 1.79

• No debt – no plans to assume debt• Cash financing of expansion

ValuationValuation

11

Year 2011(e) 2012(e) 2013(e) 2014(e) 2015(e)

FCF $ 68.46 $ 71.40 $ 79.04 $ 87.80 $ 97.90

DCF

WACC 13%

Growth Rate 2.5%

DCF Value 760.87

1yr Price 37.20

Comparables

Price/Sales(25%w)

1yr Price 22.81

EV/EBITDA(25%w)

1yr Price 29.95

50% Weight 50% Weight

1yr Target Price 31.79

% Upside 36.4%

Risks & SensitivitiesRisks & Sensitivities

12

25%

25%

25%

25%

100%

RecommendationRecommendation

Key Investment Drivers:– 1. International Expansion– 2. Movement to Consumer-Direct-based Business Model– 3. Attractive Comparables

13

Company TRLG

Recommendation

BUY

Current Price 23.31

1yr Target Price

31.79

% Upside 36.4%

Questions?Questions?

04/10/23 BU Finance & Investment Club 14

Back Up SlidesBack Up Slides

04/10/23 BU Finance & Investment Club 15

Trends and OpportunitiesTrends and Opportunities• International Expansion:– Japan, Europe– India

• Cost Reduction:– Lighter fabric for jeans– $3 million in capital expenditures for new technology

• Product Development:– Expansion of licensing for accessories– Sportswear to compete against VFC

04/10/23 BU Finance & Investment Club 16

TRLG Revenue ChainTRLG Revenue Chain

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Consumer Direct: 41.5%Consumer Direct: 41.5%

U.S. Wholesale: 39.6%

International Sales: 17.5%

Sales

Licensing – 1.4%

RisksRisks• Cotton Price– Cotton prices at end of October about $1.50 per

pound, an 80% increase from beginning of 2010

18NYTimes.com, WSJ, www.tradingeconomics.com

Cotton Future High

Cotton Future Low

Average Price of Premium Denim

2010 125.26 (Oct.) 71.89 (Jan.) ~$180

2009 73.63 42.63 ~$180

2008 77.75 42.17 ~$180