180 likes | 277 Views
Sr. Analysts: Anna Braet Jr. Analysts: Amanda Cannizzio , Bridget Eastes , Moly Fang, Jonathan Garnick ,, Imran Hossein , Jenny Kwong , Leslie Mullings , Pradeep Mahtani , Andrew Walters. SECTOR: Consumers COMPANY: True Religion. Investment Recommendation. Key investment drivers
E N D
Sr. Analysts: Anna Braet Jr. Analysts: Amanda Cannizzio, Bridget Eastes, Moly Fang, Jonathan Garnick,, ImranHossein, Jenny Kwong, Leslie Mullings, PradeepMahtani, Andrew Walters SECTOR: ConsumersCOMPANY: True Religion
Investment Recommendation Key investment drivers • 1. International Expansion • 2. Movement to Consumer-Direct-based Business Model • 3. Attractive Comparables
Premium Brand Denim & Apparel 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. By Revenue Industry Market Share by Revenue
TRLG Value Chain Raw Materials Direct from TRLG to Customers DESIGN Branded Retailers Department Stores & Boutiques Outsource Production to U.S. (denim), Mexico, Asia In-House Distribution Showrooms (CA and NY) Accessory Manufacturers Licensing
International Expansion • Headquarters: Switzerland, Japan, South Korea, Hong Kong, Germany • Joint Venture with German Distributor UNIFA Premium • Reduce Distribution costs BU Finance & Investment Club Source: Company Filings
TRLG Expansion Total Store Openings: • 101 stores in 5 years • Saturation around 1000 stores • Expanding faster than competitors • VFC: 50% marketing on sportswear • BKE: not abroad • GES: approaching saturation BU Finance & Investment Club Source: Company Filings
Movement to Consumer Direct • Motivations: • Department stores • Profit margins • Premium Brand • Maintain >30% gross margin BU Finance & Investment Club
Movement to Consumer Direct • Benefits: • Display space • More control • Avoid wholesale pricing • Maintain >30% gross margin BU Finance & Investment Club
Attractive Comparables • No debt – no plans to assume debt • Cash financing of expansion BU Finance & Investment Club
Valuation 50% Weight 50% Weight
Risks & Sensitivities 25% 25% 25% 25% 100%
Recommendation Key Investment Drivers: • 1. International Expansion • 2. Movement to Consumer-Direct-based Business Model • 3. Attractive Comparables
Questions? BU Finance & Investment Club
Back Up Slides BU Finance & Investment Club
Trends 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 BU Finance & Investment Club
TRLG Revenue Chain Consumer Direct: 41.5% Sales U.S. Wholesale: 39.6% International Sales: 17.5% Licensing – 1.4%
Risks • Cotton Price • Cotton prices at end of October about $1.50 per pound, an 80% increase from beginning of 2010 NYTimes.com, WSJ, www.tradingeconomics.com