VF Corp acquires Supreme for $2.1 billion
Colorado-based apparel and footwear company VF Corporation announced on Monday that it will acquire New York streetwear brand Supreme.
Over the last few months, VF Corp CEO Steve Rendle has been making it known that the group is looking to expand via external acquisitions. And on November 9, the parent company of Vans, The North Face and Timberland finally made its move.
The American group has revealed that it is acquiring Supreme for $2.1 billion, a little under 15x the brand's EBITDA. The deal will see current Supreme investors, The Carlyle Group and Goode Partners, sell their stakes in the brand. The label's founder, James Jebbia, as well as the brand's senior leadership team, are to remain with the company at its headquarters in New York.
Both Carlyle and Goode acquired their stakes in Supreme in 2017. At the time, it was reported that the firms had acquired half of the business' capital for around $500 million, while the brand's revenues for 2016 were estimated to be approximately $100 million. According to VF, Supreme actually achieved $200 million in sales in the fiscal year ended January 2017.
Now the brand is expected to finish the current fiscal year with some $500 million in annual revenues. Having developed its offering, signed off on a string of iconic collaborations with brands including Vans, The North Face and Timberland, and successfully driven its international expansion, Supreme is the indisputable leader in global streetwear – a market that VF estimates to be worth around $50 billion in revenues.
“VF is the ideal steward to honor the authentic heritage of this cultural lifestyle brand while providing the opportunity to leverage our scale and expertise to enable sustainable long-term growth,” said Rendle in a release. “The Supreme brand will further accelerate VF’s hyper-digital business model transformation and will be a meaningful driver of VF’s commitment to top quartile total shareholder return and long-term value creation.”
According to the same release, Supreme is expected to contribute $500,000 in earnings to VF for fiscal 2022.
“The acquisition of the Supreme brand is further validation of our vision and strategy to further evolve our portfolio of brands to align with the total addressable market opportunities we see driving the apparel and footwear sector,” Rendle added. “The Supreme brand will further accelerate VF’s hyper-digital business model transformation and will be a meaningful driver of VF’s commitment to top quartile total shareholder return and long-term value creation.”
Indeed, streetwear is a major part of the route plan outlined by VF for its investors. According to a presentation from the American group, its Vans, The North Face, Timberland and Dickies brands together achieved $3 billion in sales in this segment in fiscal 2020.
In the same presentation, the company emphasized the strength of Supreme's direct-to-consumer sales model and highlighted that the brand's gross margin of 60% is at the same level as that of the group's main profit driver, Vans. The streetwear label's operating margin of 20% is also close to that of Vans, which currently stands at 23%.
Furthermore, according to the brand's management, Supreme is looking at some interesting growth opportunities, including the development of its store network and expansion into new product categories. Apparel currently accounts for around three-quarters of the brand's business, meaning that it still has strong potential in other areas. The label recently teamed up with Opinel for a drop of Supreme-branded versions of the French company's classic folding knife. Above all though, as a brand that is known and coveted around the world, Supreme has enormous potential for international expansion, especially seeing as the U.S. market still represents more than half of its business.
Jebba, who founded the first Supreme store on New York's Lafayette Street in 1994, is certainly optimistic about the brand's prospects under its new owners.
“We are proud to join VF, a world-class company that is home to great brands we’ve worked with for years, including The North Face, Vans and Timberland. This partnership will maintain our unique culture and independence, while allowing us to grow on the same path we’ve been on since 1994,” he said.
Looking forward to 2024, VF said that it expects Supreme to achieve more than $1 billion in revenues, with annual sales growth expected to be between 8% and 10%. Now it's just down to the companies to finalize the transaction, which is expected to close by the end of this year.
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