VF Corp said it will pay $ 2 billion to buy streetwear company Supreme, add another popular brand to its Vans shoemaker list
VF Corp, which also includes brands like The North Face and Timberland, said it will pay an additional $ 300 million, provided some final milestones are met after the deal.
She said current investors Carlisle Group and New York-based Good Partners Private Equity Company were selling their stakes in Supreme, which was founded in 1994 by American-British businessman James Gibbia.
The brand is known for its red square logo with the word « Supreme » written in white, and the brand has gained a following among « hypebeasts » or fans of streetwear, with products launching for everything from bulletproof vests to cell phones It sold in minutes and people queued outside its 12 stores around the world for hours
The perceived scarcity helped Supreme gain a distinct feel among the youth and allowed it to charge much higher prices than other streetwear brands like VF’s Vans and Nike
“The model of scarcity, novelty, and strong social influence underpins a meaningful pricing power that leads to better-in-class profitability,” said Steve Rindle, CEO of VF Corp
VF Corp estimated that the wider streetwear market represented a global opportunity of around $ 50 billion and that Supreme was at the center of that market, he said.
The CEO of VF Corp said its deal with Supreme will help boost its e-commerce business, which has become more pressing for clothing and footwear makers due to the Covid-19 pandemic
Supreme, which has collaborated with many prominent fashion names including Louis Vuitton as well as Nike, Levi’s and Vans, earns more than 60% of its profits from its online business
The deal, expected to be completed in late 2020, is expected to contribute at least $ 500 million in revenue and adjusted earnings per share of 20 cents in fiscal year 2022
Supreme does not provide group sales or profits figures, but its European arm in the United Kingdom is required to publish annual accounts and these accounts have shown rapid growth and leading margins in the industry in recent years
In the year ending at the end of January 2019, the European business of Supreme had revenues of $ 130 million (£ 100 million) despite having only two stores and a profit margin, before interest expense, of 44 percent – a multiple of margins. Other streetwear brands like Vans and Abercrombie & Fitch have earned it or even luxury brands like Gucci, company files show
Analysts questioned whether Supreme was able to maintain its excellent pricing as its products became more mainstream, but was more optimistic after Monday’s announcement
“Supreme is a strong streetwear brand and while the brand has built its appeal on scarcity, we believe the market will be enthusiastic about the margin, growth profile and its contribution to VFC,” Bernstein analyst Jimmy Merriman said
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Supreme, VF Corporation, The Timberland Company, James Jebbia, The North Face, Vans
World News – CA – Owner VF Corp buys streetwear brand Supreme for about $ 2 1b
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