True Religion Shows Faith in Bargains With Outlet Store

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True Religion Apparel Inc., a company that’s made a fortune on customers’ willingness to pay $200 for jeans that cost about $30 to make, will launch its first outlet store.


Scheduled to open well before the Christmas shopping season, the outlet will be located at the Desert Hills Premium Outlets in Cabazon, on the road to Palm Springs. The center also features outlets for Burberry Group PLC, PPR SA’s Yves Saint Laurent, Dolce & Gabbana SRL and Polo Ralph Lauren Corp.


Targeting more bargain-conscious shoppers makes sense, according to True Religion President Michael Buckely.


“We are extremely active in purchasing seconds or irregulars from our contract manufacturers, and using select distribution channels for these and slower moving or out-of-season apparel,” he said. “With our own outlet store, we can directly control the distribution for this inventory and do so at financially attractive margins.”


The Los Angeles-based company posted impressive second quarter earnings last week. Sales were up 40 percent, to $31 million. True Religion’s earnings more than doubled from the same period a year ago, to $4.9 million, despite charges from an arbitration settlement.


Along with the earnings report that bested Wall Street expectations, the company announced that they had retained the Goldman Sachs Group Inc. to help with a strategic review. The bottom line: the jeans manufacturer may look better than ever for a takeover.



Cutting Costs


Hilton Hotels Corp. is making big strides in its efforts to cut costs. The Beverly Hills-based hotel chain posted underwhelming earnings earlier this month, but nonetheless received a bounce in stock price because of upbeat expectations for the rest of the year.


Hilton sold 24 fitness clubs to U.K.-based Bannatyne Fitness Ltd. The stand-alone clubs went for $172 million, which the company will use to reduce debt. Hilton is keeping 51 clubs in 44 British hotels, seven clubs outside the U.K., and 41 Express clubs in Hilton hotels worldwide.


The company also announced the intention to shed more assets.


Hilton expects the sale of three LivingWell Premier clubs in Australia to Fitness First Australia Pty Ltd. to close by the end of the month.


The company also said it may sell all or part of its Scandic brand of hotels, which could be worth as much as $1 billion.


Hilton acquired Scandic less than six months ago as part of a $6 billion purchase of Hilton Group PLC in February. The company also announced its Hilton International unit expects to list 10 separate hotels in Europe for sale by the end of September.


Wall Street investors may have used up all of their enthusiasm, however. Hilton stock dropped from $25.50 to $23.50 between Monday and Thursday.



On the Block Party


Iconix Brand Group, which owns Candie’s, Joe Boxer and Rampage, hit a bump in the road to its acquisition of Santa Monica-based Mossimo Inc. The Securities and Exchange Commission said that it would take at least two months to examine the proxy documents. The transaction, which had been scheduled in July, will now likely be delayed at least until September.


The Mossimo buyout has been a tough one from the start for Iconix. After the firm made its offer to purchase Mossimo for about $119 million, Cherokee Inc. stepped in. The Van Nuys-based company cut a licensing deal with Mossimo and Target Inc., and now gets a 15 percent cut on all Mossimo sales at Target stores. Cherokee made an unsolicited counteroffer for about $135 million, forcing Iconix to agree to pay Cherokee a $33 million finder’s fee when its deal closes. While it waits for the deal to close, Iconix executives are looking for ways to expand Mossimo beyond Target stores.



Plains Talking


Mattel Inc.’s Hot Wheels division went to the Heartland to hold a three-day festival to honor “the rich automotive history of America’s rural highways” and their top selling miniature toy cars.


Speed, Kan. (population 37) was host to the event, which drew 10,000 people from throughout the U.S. and as far as Vancouver, Wash.


To set the tone, the El Segundo company renamed two of the town’s intersecting streets “Power Drive” and “Performance Boulevard.” Speed Mayor Denise Lyon proclaimed it Hot Wheels day and presented her with a hand-crafted “Welcome to Speed” sign.


“Hot Wheels has put Speed on the map,” said Mayor Lyon. “This celebration is one that will go down in our city’s history and we are so proud to have been able to host it.”


Another event highlight was the “Miss Hot Wheels Pageant” in which eight finalists modeled coveralls and competed by identifying car parts, changing tires and creating fashion accessories from checkered flags. Megan Drumbaugh of Logan, Kan., was the winner.


More than 400 vehicles, including the original Nash from the movie “Paper Moon,” were on display at the car and motorcycle show.


A rep for Hot Wheels said that part of the reason for the event’s success was the number of Hot Wheels collectors in the area, one of which had more than 8,000 of the tiny toys.



Staff reporter Emily Bryson York can be reached at (323) 549-5225, ext. 235, or at [email protected].

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