Supreme Sold At A Low Price By VF Group

On July 17, Weifu Group announced that it would sell the American fashion brand Supreme to the eyewear manufacturer Essilor Luxottica Group (Essilor Luxottica) for US $1.5 billion (about 10.9 billion yuan). It is expected to complete the acquisition by the end of 2024.

At the end of 2020, Weifu Group announced its acquisition of Supreme for $2.1 billion, but when it was acquired by Carlyle Group in 2017, its valuation was only $1 billion. From the market environment at that time, Supreme was still one of the hottest brands, but no one could have predicted that the street trend would fade so quickly.

The original Supreme used a marketing strategy of word-of-mouth promotion and limited release, and it was precisely because of the limited style that the price of the Supreme was skyrocketed, especially for the most classic BOX Logo item. For example, a T-shirt with an official first-hand price of around $40, which is only 300 yuan in Chinese yuan, can even exceed 5000 yuan in the secondary market, doubling by up to 16 times.

Co branding allows street signs like Supreme to gradually break through niche circles. What left a deep impression was the collaboration with Louis Vuitton in 2017, where Supreme once again broke through and entered the public eye, winning the crazy admiration of the global fashion industry.

In that era, when it came to streetwear, no one could shake Supreme's position in the fashion world. Many celebrity artists have featured Supreme in their street shoots, with Rihanna, Kanye West, Justin Biber, and Lady Gaga all becoming loyal followers of Supreme.

After being acquired by Weifu Group, according to the group's expectations, Supreme's total revenue will reach $600 million in the 2022 fiscal year. However, in the 2023 fiscal year, its revenue will drop from $561 million to $523 million, and its net profit will drop from $82.4 million to $64.8 million. During the conference call after the release of the financial report, Weifu Group further revealed that the asset impairment losses caused by Supreme alone in 2022 amounted to $735 million.

In recent years, Weifu Group has also experienced difficulties in performance growth. From fiscal year 2020 to fiscal year 2023, Weifu Group's annual revenue was $10.5 billion, $9.2 billion, $11.8 billion, and $11.6 billion, respectively. In the first three quarters of fiscal year 2024, Weifu Group's revenue decreased by 8%, 2%, and 16% respectively.

From the reality, Supreme has yet to fulfill its mission. Weifu Group stated in its financial report that there were failures in the integration of Supreme and other brand business models after the acquisition was officially completed. More specifically, it failed to integrate Vans' scale expansion approach with Supreme, and Supreme's scarcity marketing experience did not make Vans more valuable.

Commenting on the transaction, Francesco Milleri, Chairman of the Board and CEO, and Paul du Saillant, Deputy CEO, stated that the company sees an excellent opportunity to introduce an iconic brand like Supreme, which is perfectly aligned with the company's innovation and development journey, providing a direct connection with new audiences.

The two stated that they will strive to retain the Supreme model, have their own space in the group's own brand portfolio, and supplement the authorized portfolio of the company's eyewear business.

Bracken Darrell, CEO of Weifu Group, stated that under the group's operations, Supreme has expanded its influence in key markets such as China and South Korea and restored strong growth. However, considering the unique business model of the brand and the integration model of the company, after strategic review, the synergy between the Supreme brand and the company is limited, so the sale is a natural result.

Source: Interface, Local Retail Observation