Vans and The North Face owner just bought Supreme for US$2 billion – is VF Corp doing for streetwear what LVMH does for luxury?

Nov 10 , 2020

Louis Vuitton's autumn-winter 2017 New York-inspired menswear collection features products in collaboration with streetwear brand Supreme. Photo: Louis Vuitton

Fashion

Versace and Jimmy Choo were acquired by Capri Holdings, while Coach and Kate Spade are owned by Tapestry – luxury fashion companies are known for bringing together complementary brands, now VF Corp is doing the same with streetwear

From LVMH to Capri to Tapestry, makers of luxury apparel are well known for pulling together complementary brands under a single banner. Now, VF Corp is testing whether that strategy can work at the lower end of the market.

With its US$2.1 billion acquisition of streetwear pioneer Supreme, VF is adding another hot name to a stable of brands that already includes the North Face, Vans and Timberland.

“Everyone needs an edge right now,” said Gabriella Santaniello, founder of retail consulting firm A Line Partners. “I think a lot of these brands are just becoming old and staid.”

Skateboards are displayed on a wall inside Supreme in New York. Photo: AP Photo

With a deal built as much around brand cachet as bottom line results, VF is taking a page from luxury rivals such as Capri Holdings, which has acquired Versace and Jimmy Choo in recent years, and LVMH, which continues to pursue a deal for jewellery icon Tiffany & Co. Along with Tapestry, which owns Coach and Kate Spade, the high-end labels have long pursued a model of joining forces under one house to increase their brand value and claim a greater market share in the process.

Luxury acquisitions often have different goals than deals for entry-level brands, said Simeon Siegel, managing director and retail analyst at BMO Capital Markets. Rather than simply seeking to increase sales, high-end tie-ups are often built around trying to “sell more expensively”, he said, and the Supreme acquisition is “somewhere in between”.

A Supreme store in New York. Photo: AP Photo

“Supreme sits in a rarefied spot of remaining true to who they are, maintaining their scarcity value, and now they have the backing of a much larger company,” Siegel said. “All of a sudden they have the infrastructure.”

Investors like the strategy: VF’s stock soared after the deal was announced the most in a single day in 33 years.

This isn’t the first time middle-tier American retailers have tried this strategy. VF itself has been successful onboarding brands in the past like with Timberland in 2011. PVH Corp, owner of Calvin Klein and Tommy Hilfiger, has had strength in China.