True Religion Apparel -- Trendsetter Past Its Peak? (TRLG)

I see this stock as a short: True Religion Apparel (TRLG) -- makers of upscale denim jeans. Why? I don’t believe expensive denim jeans is a sustainable business.

I do believe that consumer consumption habits have changed, and that people are more willing to pay for premium denim jeans. But jean companies go in and out of fashion rather quickly. Once a trend fades, the only thing remaining for a company to do in order to maintain sales is to reduce the price of the jeans until the brand losses its appeal and goes into obscurity. There is a chance that True Religion can diversify well enough to build a lasting brand like Levis, but the chances are against them.

The niche that True Religion serves -- the jetset wealthy crowd -- is highly sensitive to trend changes. Many of us can name several upscale jean companies that were popular 5-10 years ago, but no longer exist. Once True Religion jeans become too popular, the few people who can afford the price of the jeans will simply move onto another brand. I don’t expect that this will happen overnight, but I am guessing in about a 12-18 month timeframe.

TRLG 1-yr chart:

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