Supreme

Supreme’s 50 per cent sale to Car­lyle Group didn’t just rep­re­sent a rags to riches story of a NY skateshop cap­i­tal­is­ing on anti-cap­i­tal­ism, it con­sti­tuted the first ever in­vest­ment by a large pri­vate eq­uity firm in a streetwear brand.

Bespoke - - THE CONTENTS -

When James Jeb­bia founded Supreme in the Soho neigh­bour­hood of New York in 1994, he surely never fath­omed just how big his brand might one day be­come. But in a lit­tle over two decades, his hum­ble skate­board­ing shop and punk cloth­ing brand has gone from one lone store in NYC to eleven world­wide in 2017 (in­clud­ing six in Ja­pan), and from re­ceiv­ing cease-and-de­sist no­tices from Louis Vuit­ton in 2000 (be­cause it was us­ing their logo on its skate­boards without au­tho­ri­sa­tion) to ac­tu­ally team­ing up with the French brand last June to cre­ate a cap­sule col­lec­tion. Amaz­ingly, that lat­est col­lab­o­ra­tion wasn’t just a trail­blaz­ing com­mer­cial suc­cess, it also helped at­tract the at­ten­tion of one of the world’s largest and most suc­cess­ful in­vest­ment firms – Car­lyle Group – who made a cal­cu­lated bet that Supreme can sell a lot more. Now, Car­lyle’s Oc­to­ber 2017 ac­qui­si­tion of 50 per cent of the busi­ness for 500 mil­lion USD puts Supreme’s en­ter­prise val­u­a­tion at around 1.1 bil­lion USD – 1 bil­lion in eq­uity and 100 mil­lion in debt – which equates to ten times pro­jected earn­ings. There are sev­eral the­o­ries as to what Supreme could do with all that money and one pretty likely sce­nario would see the cap­i­tal used to snap up more real es­tate across the globe and ex­pand its world­wide store pres­ence, in­clud­ing gain­ing a foothold in main­land China. But more stores mean more stock and such a move goes against Supreme’s cur­rent busi­ness model of scarcity. On the other hand, if Supreme does not demon­strate top line growth then it will strug­gle to reach those pro­jected earn­ings and thus fail to jus­tify its val­u­a­tion. What­ever the case, Supreme is a fas­ci­nat­ing brand that has man­aged work with sev­eral artists over the years, in­clud­ing Christo­pher Wool, Jeff Koons, Mark Flood, Nate Low­man, John Baldessari, Damien Hirst and Neil Young, and has even been ac­cused of steal­ing artist Bar­bara Kruger’s sig­na­ture type­face for its mem­o­rable red logo. It has also set the global stan­dard for re­tail ‘drops’ and mas­tered the art of cre­at­ing buzz, de­mand and, of­ten, im­me­di­ately sold out goods. “We can have a leather jacket for 1,500 USD, and if it’s a good value, young peo­ple will un­der­stand that,” Jeb­bia says. “But we also want to have the feel­ing that this won’t be here in a month. When I grew up, I think ev­ery­body felt that way. It’s like, if I love this, it may not be here, so I should buy it,” Jeb­bia said dur­ing a rare in­ter­view. “We’re mak­ing stuff we’re proud of, not do­ing stuff to stay alive. I don’t think enough peo­ple take risks, and when you do, peo­ple re­spond – in mu­sic, in art, in fash­ion.” Can Supreme con­tinue to cre­ate a buzz and fol­low the same busi­ness model and dis­tri­bu­tion strat­egy, or will it be forced to pan­der to the whims of Wall Street and sell out? No one knows. But for the mo­ment at least, it is has the lux­ury of steam­ing ahead and let­ting its prod­ucts do the talk­ing.

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