With springtime comes a bit of spring cleaning and rumour has it Supreme’s card has been marked by owner VF Corp as it looks to slim down its portfolio.
The Vans and North Face owner declined to comment when approached by Just Style but industry onlookers believe it would be no surprise if VF Corp was to make an impromptu announcement that it is offloading the skate culture brand.
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VF Corp acquired the streetwear brand Supreme in 2020 as part of a $2.1bn deal.
Announcing the news, VF said the Supreme brand offers a $1bn global opportunity over time through international and direct-to-consumer (DTC) expansion, core pillars of VF’s 2024 strategy.
“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. 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.”
But now in 2024, things appear to have taken a different turn.
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By GlobalDataAlice Price, apparel analyst at GlobalData, told Just Style that while it was once a frontrunner in the streetwear scene, Supreme reported a 6.8% decline in revenue for the year ending March 2023.
“The streetwear player has lost its cult status in recent years, with its drops becoming predictable in style and design, no longer generating the same buzz and anticipation they once did. The player has also suffered from the rise of newer, more exciting streetwear brands such as Fear of God, Represent, and Denim Tears. For instance, brands such as Fear of God and Represent have been quick to align with consumers’ shift to a more minimalist aesthetic.”
Neil Saunders, analyst at GlobalData, agreed, adding the brand simply “isn’t exciting anymore”.
“The brand has lost some of its lustre and it has had issues under VFC ownership. There is also the question of whether Supreme, which is still run by its founder, fits into VFC’s rather corporate structure.”
VF Corp launches portfolio review
After announcing a 16% decline in total revenues and swinging to loss in Q3, VF Corp announced it was embarking on a strategic review of its portfolio of brands. At the time, Price warned things had gone from ” bad to worse” at VF Corp, adding that the heart of the problem is the “waning appeal of its core brands.”
“VF Corp’s troubles predominantly lie with the waning appeal of its core brands, especially Vans, as discerning consumers choose to invest in more desirable products that are reflective of the latest fashion trends.”
Price added a brand cull would enable VF Corp to focus its attention on core brands and help steer them back to relevance.
Is offloading Supreme the way to go?
Saunders said of course if VF can get a good price for Supreme, it’s a great move.
“It is no secret that VF Corp is reviewing its brand portfolio with a view to slimming down and selling off some parts of the business. It sees this as a way of generating returns and as a mechanism to help it focus more what it sees as the growth opportunities in its portfolio. There is a sense that VFC is a bit overgrown and needs to be pruned.
“With regard to Supreme specifically, there is a question mark hanging over how much Supreme is worth. VFC has already written down some of the goodwill for the brand and I doubt it will want to sell it if it means incurring further losses and write downs. Given Supreme is supposed to be growing again, VFC will need to explain to investors what other levers it is going to pull to drive growth from its remaining brands if it disposes of Supreme.”
While Price said divesting the brand could help VF Corp “focus its attention on its brands and help steer them back to relevance,” as it remains on “precarious financial footing”.
Likely bidders for Supreme
The big question is which companies are after a streetwear brand to add to their portfolio. Where would a brand like Supreme thrive? And how much is it worth?
Saunders reckons likely candidates could be portfolio companies like Authentic Brands which is on an aggressive acquisition spree.
Earlier this year Authentic Brands acquired the intellectual property of US footwear company, Wolverine Worldwide’s brand, Sperry and signed a licensing agreement with retailer Aldo Group to serve as a North American operating partner.
But a private equity firm could also be on the lookout for a brand such as Supreme, Saunders said.
“However, both groups would need to be convinced that they could grow the business and extract more value from it, which might be hard to accomplish in the current market. Some luxury groups may take a look if they want to add streetwear into their portfolios, but I don’t think many are in a position to make purchases at the moment.”
Any buyer eyeing Supreme will need to ensure it has put in place the strategic partnerships in order to grow the brand.
At the end of last year, brand management company Iconix International, announced the acquisition of a majority stake in the popular British streetwear brand, Hoodrich to accelerate its global growth. The strategic move was in collaboration with Hoodrich founder Jay Williams, who will retain an ownership interest in the brand.
The partnership between Iconix and Jay Williams is grounded in a shared vision for the brand’s accelerated global growth. Both entities are keen to propel the brand to new heights. As part of this acquisition, Iconix is set to collaborate closely with Batra Group, which will oversee business operations, and JD Sports, a key global retail partner.
Iconix’s expertise in category extension and global expansion, coupled with decades of experience in international brand management, positions the company as an ideal partner for Hoodrich’s next phase of growth.
