VF Sells Supreme to EssilorLuxottica
Updated 11:15 am PST: VF Corp. filed corrected financial information for Supreme after its initial announcement. Supreme contributed $538 million of revenue and $116 million in operating income during VF’s 2024 fiscal year – not $166 million as VF previous stated.
VF Corp. announced Wednesday that it is selling streetwear brand Supreme to sunglass conglomerate EssilorLuxottica, the owner of Oakley, Ray-Ban and myriad other brands and eyewear retail chains.
EssilorLuxottica will pay $1.5 billion in cash for Supreme, which VF acquired in late 2020 for $2.1 billion under previous VF CEO Steve Rendle.
Supreme contributed $538 million of revenue and $116 million in operating income during VF’s 2024 fiscal year, according to VF’s filings with the SEC.
Acquiring an apparel brand is an interesting move for EssilorLuxottica, an optical specialist. Nate Pund, managing director and global head of the Active Lifestyle banking team at Houlihan Lokey, said he was “stunned” by the deal.
“I am amazed by EssilorLuxottica doing this deal and at that price,” Pund said. “They clearly must have identified an ability to take the Supreme brand into the eyewear category and feel that can justify the very hefty price as there no other way to look at this. There are no synergies nor shared skills sets in the fashion apparel space.
“I wish them well as this looks like a big challenge from my humble perspective,” he added.
Sale to Ease VF’s Debt Load
VF, which owns 12 brands in total, including Vans, Timberland, and North Face, is overburdened with debt, and has been racing to implement a turnaround plan while cutting costs and restructuring the business.
The company ended its most recent quarter with $5.3 billion in net debt, down $540 million compared to the previous year, according to CFO Matt Puckett. Of the remaining debt, $1 billion is due in December 2024 and another $750 million in April 2025
The company said during a recent earnings call that it will pay down the $1 billion in December with free cash flow and short term borrowings, and indicated it was planning on selling part of its brand portfolio to pay down the $750 million due next April.
Earlier this year, VF announced it had launched a strategic review of its brands, and said in May that the review was complete and the brands it was open to selling have been identified.
Supreme Not Aligned with VF Portfolio
In statement Wednesday, VF CEO Bracken Darrell said the review concluded Supreme was not the best fit for VF’s portfolio.
“Under VF, Supreme expanded its presence in the key markets of China and South Korea and has returned to delivering strong growth,” he said. “However, given the brand’s distinct business model and VF’s integrated model, our strategic portfolio review concluded there are limited synergies between Supreme and VF, making a sale a natural next step.”
Darrell also said the Supreme sale will ease VF’s debt load.
“While we will always look to adjust the VF portfolio from time to time, this transaction gives us increased balance sheet flexibility,” he said. “It also supports our overall program to better position the company for long-term growth and more normalized debt levels.”
The Allure of Supreme’s DTC Model
While the fit with EssilorLuxottica also seems unusual, the optical company indicated that it was intrigued by Supreme’s 100% direct-to-consumer model.
“With its unique brand identity, fully-direct commercial approach and customer experience – a model we will work to preserve – Supreme will have its own space within our house brand portfolio and complement our licensed portfolio as well,” said Francesco Milleri, chairman and chief executive officer, and Paul du Saillant, deputy chief executive officer at EssilorLuxottica, in a statement “They will be well-positioned to leverage our Group’s expertise, capabilities, and operating platform.”
Supreme, which started in New York City steeped in skate culture, now operates 17 stores around the world and a robust e-commerce business.
EssilorLuxottica has 200,000 employees and owns retail chains Sunglass Hut and LensCrafters, licenses a multitude of well-known brands in the sunglass and optical categories, and owns Oakley, Ray-Ban, and Costa. In 2023, the company generated consolidated revenue of 25.4 billion euros.
