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Supreme’s tremendous brick-and-mortar opportunity, acquisition, and scarcity business model

Thursday, Nov 12, 2020

VF Corporation has announced their recent acquisition of the global streetwear brand, Supreme, for $2.1 billion. This acquisition will serve as a key part of VF’s plan to accelerate their “consumer minded, retail-centric, hyper-digital business model transformation.”

“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,” said Steve Rendle, VF’s Chairman, President, and Chief Executive Officer.

Although VF is already secure in the industry with $1 billion in global potential, Supreme offers a strong financial profile that will serve as an asset to the company. Supreme has 20% operating margin, 60% gross margin and 8-10% sales growth. These performance numbers strike similarities to other streetwear brands in VF’s portfolio. Streetwear has become structurally attractive in retail – accounting for $50 billion in global opportunity.

According to VF, this deal serves as a tremendous growth opportunity for both, VF and Supreme in the brick-and-mortar space. Now the retailers can build a substantial presence in the physical space, while adhering to Supreme’s scarcity business model, which only runs 12 stores globally.

Rendle believes that Supreme’s brick-and-mortar stores will serve as an expression of the brand. New Supreme locations will open “where the Supreme followers and lovers exist,” according to Rendle.

Supreme has unmatched consumer loyalty among Gen Z and Millennials. This leaves the brand with plenty of opportunity to leverage their momentum through online and in-store revenue to scale their physical footprint and growth in the market.

Although scarcity is a powerful business model, as demonstrated by Supreme’s curated and controlled product distribution and physical footprint – the brick-and-mortar space can undoubtably further their tightly-managed assets. If Supreme expands their physical touchpoints and retail experiences, this will likely impact sales for the brand beyond 8-10%. And now that they are working as a part of VF’s growing empire, this initiative will be that much easier for Supreme.

Source: VF & Supreme, VF Announces Acquisition of Supreme – VFC, VF Snaps Up Supreme – Retail Dive
Photo Credit: VF Corp. Is Buying Supreme – CNN

About VF
Founded in 1899, VF Corporation is one of the world’s largest apparel, footwear and accessories companies connecting people to the lifestyles, activities and experiences they cherish most through a family of iconic outdoor, active and workwear brands including Vans, The North Face, Timberland and Dickies. Our purpose is to power movements of sustainable and active lifestyles for the betterment of people and our planet. We connect this purpose with a relentless drive to succeed to create value for all stakeholders and use our company as a force for good. For more information, please visit vfc.com.

About Supreme
In April 1994, Supreme opened its doors on Lafayette Street in downtown Manhattan and became the home of New York City skate culture. At its core was a group of neighborhood kids, New York skaters and local artists who became the store’s staff, crew and customers. While it developed into a downtown institution, Supreme established itself as a brand known for its quality, style, and authenticity. Over 25 years, the Supreme brand has expanded from its New York City origins into a global community.

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