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My initial instinct tells me this company does not have a durable competitive advantage. There are four broad types of competitive advantages, according to Morningstar: 1) low-cost operator, 2) high switching costs, 3) intangibles, and 4) network effect.


I don't know much about True Religion but when looking for a competitive advantage I think you need to see it as Volcom, another aparel maker. They also have a few stores but mostly sell through channels like PacSun and Zumiez. The advantage comes from having a protected brand and playing to a certain niche in the market. So I'd say it qualifies for 3) and a bit of 4). For Volcom 4) is actually quite strong which is a very large reason for their success currently.

The hard part is knowing whether the advantage is durable or not. Fashion can be fickle. But that hasn't stopped brands like Nike to establish a considerable moat.

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