Supreme’s founder, James Jebbia, confirms the brand has sold a minority stake in the company. Women’s Wear Daily claims The Carlyle Group has purchased 50% of the company for $500 million in a deal that valued the business at over $1 billion, making this move the first of its kind involving a streetwear brand. Amazingly, Jebbia managed to turn a single store on Lafayette Street into a multi cultural franchise, but what does this mean for Supremes’ future?
Built on tightly controlled releases, and carefully cultivated street cred, Supreme relies on exclusivity and a business model of scarcity. Collabs with Louis Vuitton, Stone Island, and Comme des Garçon have ventured the steetwear brand into a fashion staple. With projected earnings for next year at around $100 million, and a massive investment from a firm like The Carlyle Group, there’s no mistake that Supreme will expand as a brand. Typically, these private equity firms aim to acquire, rapidly grow, then sell companies within 2-5 years, and Supreme looks to be The Carlyle Group’s next project. Jebbia has remained very tight lipped about investors in the past, as in 2014 he sold a minority stake to Goode Partners, another New York based equity firm. Although Supreme wasn’t listed as a portfolio company in Goode’s website, neither Goode or Supreme publicly talked about the deal. This could be due to the fact that streetwear brands highly value authenticity, and keeping this deal a secret was helpful for Supremes’ image of being an independent label.
The company has stores in Los Angeles, London, and its original outpost on Lafayette Street, all of which pre-date Goode’s investment, but the label’s e-commerce business is what’s thought to account for a significant chunk of overall sales revenue over the past five years. Goode’s investment has been a big part of Supremes’ expanding retail network and can be credited for financing their digital growth too. As for now, all signs point to the brand expanding furthermore in Asia, where Supreme already has six stores in Japan but none in China, Hong Kong or Korea. With more stores popping up comes more stock, which directly contradicts the scarcity model Supreme is built on. If everyone who wanted to buy Supreme was able to, would anyone want to buy it anymore ?
As previously stated, private equity firms typically aim to acquire, rapidly grow and then sell companies within 2-5 years and the deal with Goode may help to explain some of Supremes’ recent moves. The blockbuster collaboration with luxury mega-brand, Louis Vuitton, attracted waves of consumer excitement as well as disappointment from longtime fans that the company had abandoned its counterculture roots and “sold out.” (In 2000, Supreme received a cease and desist letter from Louis Vuitton after it printed the luxury brand’s classic monogram on skateboard decks without authorization). This is likely the reason why Jebbia kept the backing from Goode a secret and consistently avoided questions on investors. “As a small brand, we do it all. We don’t need an investor,” Jebbia told BoF back in 2016. “We would never go anywhere or do anything where we feel it would compromise what we do.”
For its part, Goode seems to have been happy to remain quiet about its stake in Supreme, likely realizing the benefits of helping to maintain the fiction that Supreme was a wholly independent label without financial backing as its investment grew and grew. Goode is thought to have sold its stake in Supreme to Carlyle, netting the firm a very healthy exit.
So what will Carlyle’s newly acquired position in the business mean for Supreme? Like Goode, the private equity giant will ultimately be looking for an exit. Future acquirers could include a strategic investor like the French luxury conglomerate LVMH, which owns Louis Vuitton. Supreme could also IPO, following a route taken by the likes of Michael Kors, but either path means driving growth, greater exposure and perhaps catapulting Supreme into the mainstream. Ultimately, that leads us to raise the question always surrounding the street wear giant: How will they maintain the balance between high sale volumes, and the perception of exclusivity that has made them a powerful brand for so many years? The company who started out selling graphic t-shirts and hoodies (and even put their name on a brick and convinced people to buy it) have definitely came along way, and I’m sure there is a lot more to come.