WWD LIST: Supreme’s Place in Luxury Valuations

Everything about Supreme is exclusive and buzzy, but it’s not exactly expensive — and the same goes for the streetwear firm’s $2.1 billion-plus deal to be sold to VF Corp. 

Chalk it up to Supreme’s world view, which has customers lining up to get into its store stocked with relatively small runs of products that could be sold for more, but aren’t. 

Take the company’s collaboration with Nike on white Air Max Plus sneakers. The plain white versions of the shoe are sold on Nike’s web site for $160. And the collaboration (featuring a red swoosh and Supreme’s logo) was sold for $180 on Supreme’s site — but they’re sold out now and were going for $225 on StockX. 

Somewhere in between all that — the scarcity value, the branding and the design tweaks — is the magic of Supreme. It’s a delicate magic that could be easily exploited for millions, but only at a cost to the brand. 

So founder James Jebbia seems to have been looking for the right fit — and not only top dollar — by selling his company to VF, where he will continue to operate the business in a kind of walled off garden. 

For now, at least, it seems Supreme can continue to be Supreme and that will last as long as the brand keeps up its performance. 

“This brand will continue to operate as it always has, we do not look to come in and make any changes,” Steve Rendle, chairman, president and chief executive officer of VF, told WWD. “We’re here to help, support and enable.”

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The particular dynamic between Supreme and VF, which were in talks since April 2019, and a world reshaped by the pandemic led to a deal that included the potential to expand to $2.4 billion based on performance and multiple of less than 15 times earnings before interest, taxes, depreciation and amortization. 

Exactly how strong of a multiple that is isn’t exactly clear — there haven’t been enough pandemic-era deals to really gauge. But it falls somewhere in the middle of the pack in luxury dealmaking over the past five years, according to a tally by PJ Solomon, which crunched some recent numbers for WWD.

Some luxury-tech plays have seen sky-high valuations, including Apax Partners’ 2017 deal to buy Matchesfashion.com with an enterprise value of 42.1-times EBIDTA, but there are many companies that traded closer to the Supreme valuation, including Golden Goose (in three separate deals), Balmain and Christian Dior.

What any of them would go for mid-crisis is anyone’s guess. 

David Shiffman, cohead of retail at PJ Solomon, described Supreme as “an iconic global luxury streetwear brand.”

“I would argue that this is a multiple paid for a global, highly profitable, fast-growing branded business,” he said. “There’s enormous growth potential, direct-to-consumer digital e-commerce and store base. It also enjoys a very high margin. James Jebbia is one of the great creative brand builder geniuses on the planet, he’s a unique asset.”

The Supreme deal could be a sign of things to come as businesses that spent the spring battening down the hatches and raising money are taking steps to prepare more for the future. 

“You’re now seeing deals beginning to happen again as people have gotten more comfortable with the environment that we’re in,” Shiffman said.

 

The Luxe Valuation Landscape

VF secured a much-coveted asset with its deal to buy Supreme, and paid less than many other buyers in the luxury.

Target Company Date Acquiror Enterprise Value (in millions) EV/EBITDA
Matchesfashion.com 2017 Apax Partners £800 42.1
Yoox-Net-a-porter 2018 Richemont € 5,420 34.6
Roberto Cavalli 2015 Clessidra € 390 25
Tiffany & Co. 2020 LVMH $16,547 24.8
Corneliani 2016 Investcorp € 87 23.8
Versace 2018 Michael Kors (Capri) € 1,830 22
Jimmy Choo 2017 Michael Kors (Capri) $1,350 17.5
Christian Dior 2017 LVMH € 6,500 15.6
Balmain 2016 Mayhoola € 485 15.2
Golden Goose 2020 Permira $1,380 15
Supreme 2020 VF Corp. $2,400 ~15
Golden Goose 2017 Carlyle € 400 14
Baccarat 2017 Fortune Fountain Capital $164 12.7
Golden Goose 2015 Zignago Holdings/Ergon Capital € 158 12.4
Supreme 2017 Carlyle $1,100 11
Source: PJ Solomon

N/D = Not disclosed

EV/EBITDA = enterprise value to earnings before interest, taxes, depreciation and amortization

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