When VF Corp, the owner of brands like The North Face and Vans, announced in late 2020 that it was buying Supreme, it touted how the cool streetwear brand would teach the other labels in VF's portfolio how to be more nimble and sell more directly to consumers via their own stores and websites. Instead, the company learned the hard way how dangerous style-over-substance dealmaking really is.
VF announced Wednesday it had reach a deal to sell Supreme to Ray-Ban maker EssilorLuxottica for $1.5 billion, admitting the acquisition initially considered transformative had been a bust. By 2023, the company had taken a couple of big write-downs amounting to two-thirds of Supreme's value since the acquisition, reflecting its dramatic brand erosion in three short years. The hoped-for hipness-by-osmosis didn't materialize, and worse, it diverted management's attention at a time its other mega-brands were starting to falter.
"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," said VF CEO Bracken Darrell in a statement.
In 2020, VF had promised not to crush Supreme's specialness with too tight a corporate hug, but ultimately, it appears to have do so anyway, if unwittingly. Darrell, who became CEO a year ago to staunch a business deterioration that included sales declines last quarter at all VF's big brands, including which Dickies and Timberland, hinted to Fortune in a March interview that "we made some missteps in the beginning with Supreme. When they run it independently, they’re fantastic."
Now with Supreme sold off, Darrell and his C-suite can focus on shoring up VF's key brands. Take Vans, which had been the company's largest name in 2023, just slightly ahead The North Face: Vans' revenue fell 24% last year. Dickies and Timberland also saw double-digit percentage declines, while The North Face had a mostly steady year until a warm winter decimated fourth-quarter sales.
Darrell's predecessor at VF, Steve Rendle, had been under pressure from Wall Street for years to make a big acquisition, a practice that was core to VF's growth, and its modus operandi for years. Rendle was drawn in by the fact that Supreme got 60% of its revenue by selling directly to customers rather than via wholesale partners. He was also taken with how Supreme released new products at a much faster clip—often weekly—than most apparel brands. The hope was that Supreme's strategy would rub off on other brands, and speed up VF’s metabolism. Supreme was VF's biggest acquisition since 2011, when it bought boot brand Timberland. VF had long been renowned for rehabilitating damaged brands and scaling promising ones, thanks in part to its clout with suppliers and retail landlords because of its size.
But ultimately, not only did VF's Supreme acquisition not deliver on hoped-for benefits, it distracted management as the rest of the company started to fall apart. Skater-focused Vans, for instance, bored customers by more or less trotting out the same five shoe models for years as it was lapped by competitors. Other brands were also underachieving as management tried to figure out how to get more out of Supreme. "We also didn’t take advantage of our formerly fast growth to invest back in innovation, new products, and new franchises," Darrell said in March interview with Fortune.
VF, whose shares rose on the news of the Supreme sale, but are down about 85% from all time highs hit in 2019, can now focus on restoring itself to its former self with one less distraction. And Darrell told Fortune in March not to expect any new M&A deals anytime soon.
"It’s about turning the business around for long-term sustainable growth, not deals," he said.
