What's Next for Supreme After their Acquisition with VF Corp?



Streetwear enthusiasts have been buzzing all morning. Its official, Supreme was acquired by VF Corp (NYSE: VFC) for $2.1B. So lets get into it; what does this mean? Who are the big winners? Who are the big losers? What's next for Supreme?


VF Corp is a portfolio company who has a long history of acquiring brands, including Timberland, North Face, Vanity Fair, 7 for All Mankind, Wrangler, and more. They have a tendency of acquiring growing brands that are at-or-near their life cycle peak and then scaling up the business – in other words, driving top line revenue growth – and spinning out free cashflow to harvest. This is VF Corp’s business model; acquire, scale, harvest.


Source: VF Corp press release, 11/9/20


Like most publicly traded companies who grow via acquisition, they are looking for revenue, channels (i.e. access to new markets), and/or opportunities for margin expansion. Supreme offers all of the above. Supreme has direct access to a $50B streetwear market that VF Corp does not have a large presence in. Based on the press release from VF Corp, we learned that Supreme does ~$0.5B in annual revenue today, which means Supreme has ~ 1% market share in the overall streetwear market. For a company like VF Corp that has such a deep portfolio of global brands, this creates an opportunity to take a brand with significant growth potential and scale the business.


Wait, scale the business? What does this mean?


Source: VF Corp press release, 11/9/20


So there it is. VF Corp wants to essentially double Supreme's business. Based on the chart above, they expect Supreme to grow at 8-10% annually. If you read between the lines, VF Corp is saying they plan to immediately take an aggressive expansion strategy for the Supreme brand and double the business within 3-4 years. This means more stores, more product volume, and integration with existing portfolio companies both in physical and digital channels.

If you’re a Supreme collector or reseller, there’s a good chance you’re not going to like what I say next. Supreme will follow the Yeezy trajectory – a brand that was once cool but hyper-democratized. Expect to see Supreme on soccer moms at grocery stores. Dare I even say a Supreme outlet store? Supreme at TJ Maxx? This is all within the realm of possibility if you look at other VF Corp brands.


Supreme, like Yeezy, will likely not be a brand that people continue to aspire to or intensely identify with. Surely, there will be an item that releases once in a while that will garner attention. But the old days are over. For those of us who had been with Supreme for years and followed the brand’s meteoric rise from New York street and skate culture to global phenomenon, it is a bittersweet moment. All we can do now is say that we were there and helped make the brand what it was. Just like when I see a pair of Yeezy's on a soccer mom at Whole Foods, I remember the old days of lining up for my 750s or staying up all night in the hopes of copping 1 pair. But as the brand became hyper-democratized, it lost its cool and most of the “day ones” simply moved onto the next thing. Unfortunately, we can see that Supreme will meet a similar fate. Not to say that the brand won’t be incredibly profitable and successful, it just won’t be for the people that it was originally intended for.

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