The die was cast when private equity firm Carlyle Group reportedly spent $ 500 million on a 50 percent stake in Supreme in the fall of 2017. So the sale falls exactly within the typical three to five year timeframe for a company like Carlyle, especially in the cyclical consumer space.
The lack of surprise at the VF Corp. announcement on Monday to buy the emerging fashion brand for $ 2.1 billion reflects recent alliances between Supreme and VF brands like Vans and North Face. These mashups were certainly part of VF’s due diligence process before the bid was submitted.
By including the brand in the clothing empire, VF was ready to generate around four times the sales forecast by Supreme and a multiple of 15 times the Ebitda (earnings before interest, depreciation and amortization, which is a measure of cash flow) for the 2022 financial year. to pay. The deal marks a significant payday for top founder James Jebbia as well as Carlyle.
The deal also raises a frequently asked question: How does a large conglomerate like VF Corp. Supreme in his brand stable and at the same time keeps the “underground” and nervous streetwear cache of his new purchase? Supreme’s reputation as a pioneer in modern streetwear is due in part to its agility. This attitude may be harder to sustain when it is no longer independent.
You can find the answer in the Supreme product drops. The newest items include a mix of skateboards, a jackknife, and a fish bowl. The retailer’s advertisement also emphasizes making bold points. In a sort of retro media movement, Supreme ads recently served as the cover wrap for an issue of the New York Post. Celebrities, from rapper Travis Scott to Victoria Beckham to the Kardashian-Jenner clan, often wear the brand’s look.
VF’s mode fails
The purchase of Supreme can be seen as part of the continued metamorphosis of VF. It’s spun off or sells old businesses like the denim division, which was largely made up of Lee and Wrangler. At the same time, VF has added brands like Timberland to its list. According to VF, Supreme is strengthening the parents’ “retail-focused, hyperdigital business model” with the potential to become a $ 1 billion brand through international expansion and direct expansion to consumers worldwide.
“While the terms“ lifestyle brands ”and“ authenticity ”are widely used and abused in our industry, a quick scan of the VF portfolio confirms that each of their acquisitions has retained the integrity of their original brand DNA and still fits comfortably into the VF family of active and accessory products, ”said Hayes Roth, Principal at HA Roth Consulting.
“Supreme undoubtedly meets that threshold as an ‘activewear’ VF brand, and according to all statements so far, VF will celebrate and support its authenticity while professionalizing its management and marketing – as they have done so well for their other brands,” he added added.
Supreme is a pure fashion brand and not a brand that is in part driven by utility, like North Face’s outdoor-minded buyers. This shape instead of the functional aspect raises a wrinkle for VF. To stay successful, it has to stay relevant from season to season.
VF’s success with its other fashion-related acquisitions has been mixed. For example, in 2007, VF acquired 7 For All Mankind for $ 775 million. That brand, along with Splendid and Ella Moss, was dropped nine years later due to volatile sales for a fraction of the cost of that deal.