Pedestrians carry Supreme shopping bags while walking along a street in New York
Demetrius Freeman/BloombergVF Corp. is flipping between small gains and losses Tuesday, a day after the apparel maker announced that it purchased Supreme Streetwear in a $2.1 billion deal.
VF Corp. (VFC) is buying Supreme from its founder, James Jebbia, and private-equity firms Carlyle Group (CG) and Goode Partners. Although VF didn’t provide exact figures, the deal values Supreme at about $2.1 billion, including debt. The company said that Jebbia and the brand’s senior leadership will maintain their positions.
New York-based Supreme is known for its bold white-and-red logo and cult-like following, and Jebbie said that the company would stay true to its “unique culture and independence” after becoming a part of VF.
VF, which owns other streetwear brands like Vans and Timberland, climbed more than 11% yesterday on the news, ahead of the market’s overall euphoria about a potential Covid-19 vaccine.
Analysts are largely upbeat on the deal. Barclays ’ Adrienne Yih writes that the “acquisition of Supreme is everything that we could have hoped for as an addition to the VFC brand portfolio,” given that it is an early-stage growth brand with a loyal following and best-in-class performance metrics.
Robert W. Baird’s Jonathan Komp reiterated an Overweight rating and raised his price target to $92 from $85, writing that he is “highly encouraged” by the news. He believes Supreme is a good use of VF’s capital, which should provide the company with a high return on investment and meaningful long-term potential.
Susquehanna’s Sam Poser reiterated a Positive rating on VF and lifted his price target by $10, to $100 on the news, writing that “Supreme adds a renown, fast-growing streetwear brand” to the company’s portfolio. He thinks VF will benefit from Supreme’s knowledge of its consumer, nimble merchandising, and its “industry-leading scarcity model,” while VF’s international reach and digital infrastructure will in turn help Supreme grow.
Telsey Advisory Group’s Dana Telsey reiterated an Outperform rating and $90 price target on VF, writing that Supreme’s on-point execution has led to 20% operating margins at the brand, and it has “demonstrated its resiliency even during the Covid-19 pandemic as revenue has increased high single digit year to date and is showing an acceleration since the brand's fall/winter collection launched in August.” She also likes the firm’s 60% digital penetration.
Those on the sidelines were cautiously optimistic about the deal. BMO Capital Markets’ Simeon Siegel reiterated a Market Perform rating on VF, writing that “ultimately the question will be whether the operational and balance sheet benefits offered by VF will override any long-term pressures that arise from being publicly owned. For now, we favor the former and see healthy runway for the brand. However, we remain neutral on VF as we see shares as fairly valued.”
Raymond James’s Matthew McClintock reiterated a Market Perform rating but writes that the deal “strategically sound and fits well with the company's long-term vision.”
VF is down 0.5% to $77.45 in recent trading.
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November 10, 2020 at 11:45PM
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VF Corp Buys Supreme. What Wall Street Has to Say. - Barron's
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