VF Sells Supreme for $1.5B
In a significant move within the fashion and apparel industry, VF Corporation, the powerhouse behind major brands such as Vans and The North Face, has finalized the sale of the streetwear brand Supreme for $1.5 billion. This decision comes after the company’s acquisition of Supreme in 2020 for a staggering $2.1 billion, a move that many industry analysts viewed with skepticism from the start.
Indeed, David Swartz, a senior equity analyst at Morningstar Research Services, commented on the initial purchase, suggesting that VF may have overpaid for Supreme. According to Swartz, following the acquisition, Supreme’s financial health appeared to decline, leading to significant impairments on VF’s balance sheet. “As a near-luxury brand predominantly engaging in online sales, Supreme struggled to synergize with VF’s portfolio,” Swartz explained.
VF Corporation has faced revenue challenges across several quarters, prompting the company to launch a transformation plan aimed at revitalizing its key brands, particularly Vans, and enhancing sales in the North American market. The company also undertook a strategic review of its assets and welcomed new executive leadership, including a new Chief Financial Officer and new presidents for The North Face and Vans.
“This deal will allow VF to pay down debt and focus on Vans and The North Face, which are more important brands,” added Swartz, highlighting the strategic benefits of the sale. Tom Nikic, an analyst from Wedbush, noted the complex nature of the transaction. While the $1.5 billion sales price represents a roughly 30% loss on VF’s initial investment, it offers the conglomerate desperately needed flexibility in managing its balance sheet, particularly in light of upcoming debt obligations.
Despite Supreme being one of the most profitable brands in VF’s portfolio, the decision to sell reflects a strategic pivot toward strengthening core brands and achieving a more stabilized financial outlook. VF’s joint press release with the buyer, EssilorLuxottica, acknowledged the limited synergies between the two companies as a compelling reason for the sale. “This transaction gives us increased balance sheet flexibility,” stated Darrell in the press release, underlining the move as an alignment with VF’s long-term growth and debt management strategies.
EssilorLuxottica, a giant in the eyewear industry with holdings that include Sunglass Hut, Ray-Ban, and Oakley, marks a shift in its portfolio strategy with the addition of Supreme. The streetwear brand, known for its apparel, accessories, and skateboards, represents a foray into new market segments and consumer demographics for EssilorLuxottica.
Francesco Millerli, chairman and CEO of EssilorLuxottica, along with deputy CEO Paul du Saillant, expressed enthusiasm about the acquisition. They see it as an “incredible opportunity” to tap into fresh audiences and avenues of creativity. Supreme’s unique brand identity and direct sales model are aspects that EssilorLuxottica aims to preserve while leveraging its extensive expertise and operational platform to foster the brand’s growth within their vast portfolio.
The sale of Supreme by VF to EssilorLuxottica illustrates the dynamic nature of the fashion and apparel industry, where strategic realignments can enhance corporate objectives and adapt to changing market conditions. As VF Corporation turns its focus more narrowly towards its flagship brands, EssilorLuxottica prepares to infuse its already diverse portfolio with a vibrant and distinct new offering, setting the stage for an intriguing future in the global fashion landscape.
