LOS ANGELES – Upscale jeans maker True Religion Apparel Inc. said Wednesday that it filed for bankruptcy reorganization, making it the latest Southern California apparel firm to falter as people embrace online shopping.
But True Religion said that in tandem with filing under Chapter 11 of the bankruptcy laws, its owner, TowerBrook Capital Partners, a private equity firm, reached a proposed deal with lenders to slash True Religion’s debt by about three-quarters as it continues operating.
“We are taking an important step to reduce our debt, reinvigorate True Religion’s iconic brand and position the company for future growth and success,” which includes putting more resources into its online efforts, True Religion Chief Executive John Ermatinger said in a statement.
The Manhattan Beach firm has 140 stores under the True Religion and Last Stitch brand names and about 1,900 employees. The company said it closed 20 stores last year to cut costs.
Founded in 2002, True Religion grew popular with its array of pricey designer jeans and from 2007 through 2012 it nearly tripled in size, becoming a company with revenue of $490 million in 2013.
But starting that year, True Religion “began experiencing declining sales caused by the general trend of consumers (moving) away from traditional retail to online shopping,” Dalibor Snyder, True Religion’s chief financial officer, said in a filing with the U.S. Bankruptcy Court in Delaware, where the company filed its Chapter 11 petition.
That trend has accelerated in recent years with shoppers shifting from brick-and-mortar stores to e-commerce. In addition, the rise of “fast-fashion” stores – such as Zara, owned by Inditex of Spain, and H&M Hennes & Mauritz of Sweden – hobbled True Religion and other retailers.
The shift also resulted in the bankruptcies of such Southern California-based retailers as American Apparel Inc., Pacific Sunwear of California Inc., Nasty Gal Inc. and Wet Seal.
True Religion’s problems were “further adversely impacted by new product designs launched by the company that failed to resonate with the consumer,” Snyder said in his filing.
In its fiscal year that ended Jan. 28, True Religion lost $78.5 million on revenue of $369.5 million.
Under its deal with lenders, True Religion plans to swap debt for new equity in the reorganized company that will reduce its debt by more than $350 million. The firm said it also had obtained additional financing of up to $60 million from Citizens Bank.
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