EssilorLuxottica just bought itself some serious “street cred.” The French eyeglass retailer, owners of the iconic brand Ray-Ban, just purchased the Supreme streetwear brand from VF Corporation (NYSE: VFC) for $1.5 billion. In return, VFC stock soared 14%, closing by the end of Wednesday’s session at $16.15. Despite this bump, VF stock has dropped 13% so far this year.
CEO Bracken Darrell explains the company’s decision to sell this highly reputable brand which is popular among younger consumers. VF, which owns the North Face, Vans, Dickies, and Timberland brands, has been experiencing slowing demand and inventory overstock. Upon reviewing its portfolio, they determined that Supreme’s business model didn’t match well with the broader VF model, with “limited synergies” due to their different target markets. The deal should go through by the end of the year.
Who Is Supreme?
Supreme, a streetwear brand that started in 1994 as a New York City skateboarding shop, has evolved into a billion-dollar phenomenon. The company has a unique business model and marketing strategy, catering to an urban youth demographic and relying on community-driven growth. Products are limited in availability and sold as weekly “drops,” which creates scarcity and high demand.
Supreme collaborates with celebrities and artists to enhance its appeal and authenticity. Customers spread its message and logo through social media and stickers. The strategy is creating curiosity and desire rather than pushing products. This approach has built tremendous enthusiasm among its followers, who are willing to pay top dollar in secondary markets or wait in long lines to get their hands on the merch. Larger companies like Adidas and Nike have tried to replicate this strategy but have fallen short.
Can The Bull Run Continue?
Whether shedding this robust yet incongruent brand will help VF focus more on its other brands remains to be seen. Citigroup thinks that it might, as they’ve recently upgraded their outlook from a Neutral rating to a Buy, which is the consensus rating based on 20 analysts. The average 12-month price target is $13.36, implying approximately a 19% decrease from where it’s currently trading at $16.445.
Julie Stoller does not have positions in this company. Stocks.News does have positions in VFC.
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Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...