image: Supreme
News broke late last week that Supreme had sold something like a 50 percent stake of its brand to private equity giant the Carlyle Group for $500 million dollars, thereby valuing the (at least until recently) ultra-cult skatewear/streetwear brand, which was founded by James Jebbia in New York in 1994, at roughly $1 billion.
As WWD noted on Monday, “The transaction was kept unusually quiet, which sources attributed to founder James Jebbia’s concerns that taking such a big check from private equity would ultimately hurt the brand’s street cred, particularly in the U.K., where he was raised.”
Others have argued that Supreme is already on shaky ground in terms of its credibility after teaming up with corporate luxury giant Louis Vuitton for a collaboration this summer, which saw Supreme’s famed box logo splashed across everything from pricey designer shirts and jackets to $68,500 Louis Vuitton steamer trunks – all of which was only available via Louis Vuitton-operated pop-ups.
Still yet, “the huge infusion of cash into Supreme [thanks to the Carlyle investment] could potentially alienate the brand’s hard-core supporters, who have thrived on the niche-iest of niches and hard-to-get products,” per WWD. The fashion publication is referring to the die-hard fans that routinely flock to Supreme’s brick-and-mortar stores and its e-commerce site each week for “drops” of new merchandise, ranging from t-shirts and shorts to branded chopsticks and actual bricks.
Can Supreme Do Both?
The question is: Will the Carlyle group, which is expected to grow the 23-year old brand that boasts just 11 stores and a cult mentality over the next 3 to 5 years before off-loading it for an even bigger price tag, be able to maintain the mystique or cult-appeal associated with the brand known for consistently drawing huge lines to its stores and boasting products that immediately sell out no matter what?
Time will certainly be the most telling indicator, but in the meantime, it is worth considering the Carlyle Group’s recent dealings.
One of the largest private equity and alternative investment firms in the world, Carlyle – which was founded in 1987 in Washington D.C. by William E. Conway Jr., Daniel A. D’Aniello, and David Rubenstein, and maintains no shortage of ties to former Republican president George H. W. Bush (who served as a senior advisor to the Carlyle Asia Advisory Board from April 1998 to October 2003) – is said to specialize in four key business areas: corporate private equity, real assets, global market strategies, and investment solutions.
WWD notes that “in the consumer space, Carlyle is known as a cultivator of brands, a reputation that was bolstered when it invested in Dr. Dre and Jimmy Iovine’s Beats by Dre, which was sold to Apple in 2014 for $3 billion.”
Its other recent forays into consumer goods – as distinct from its aerospace, government services, healthcare, industrial, telecom, energy, and commodities, etc. ventures – have included youth lifestyle brand Nixon, Moncler, Philosophy Inc., haircare company Vogue International LLC, China-based Shenzhen Ellassay Fashion Co., Ltd., and Sequential Brands, which is the licensee for Joe’s Jeans, Jessica Simpson, and Ellen Tracy.
As for whether the move will be viewed as Supreme “selling out” and going corporate, WWD cited Keith Train, the co-owner of skatewear chain Black Market, as saying: “Maybe 20 years ago selling out was a concept, but nowadays it’s the way that business is done and people understand that,” Tran said. “You can’t buy anything in the store. It’s mainly only done via resale, which is expensive. So, if I was a consumer, I would think this deal is awesome if it means I have a better chance to buy the product at a regular price.”
This purported easy-going mentality among skate fans is quite a bit at odds with the discussion that has consistently surrounded skate labels, such as San Francisco-based magazine-turned-brand Thrasher, for instance, which has been consistently knocked-off by brands, such as Forever 21 and H&M, which have co-opted its flame logo. The brand has commonly taken to its Instagram account to make clear that it is in no way affiliated with the knockoffs, at least in part because it does not want to appear to its true fans, including those that have been around since the magazine first came out in 1981, that it was selling out or going corporate.
And Thrasher is not alone. As Racked detailed late last year in an article entitled, “Why Skate Brands Can’t Go Mainstream,” when beloved skate brand Illegal Civilization announced that it would be available in stores like Zumiez and Urban Outfitters, all hell broke loose.
One of the overwhelming sentiments from fans when the brand announced that it would be coming to a mall near them? “Illegal Civilization was tight because big corporations weren’t selling their clothing.” Another common response: “If you want to keep your integrity in a company, doing business with large corporations who are focused solely on profiting from skateboarding isn’t the right move. They’re a sell-out.”
This is certainly something that 37-year old surf/street brand Stüssy has worked hard to avoid. Unlike many of its competitors, Stüssy has remained independently-owned and now, as a major, global brand (it does something like $50 million in business annually and stocks at stores ranging from Urban Outfitters to e-commerce giant Revolve) has managed to avoid being labelled a sell-out, something its CEO David Sinatra says has been possible by remaining young at heart as a company and consistently staying in-tune with the company’s iconic branding.
Also helping to keep Stüssy relevant to its core consumers, as well as covetable for its longest-standing fans, a “brand-first, revenue second” philosophy, in order to avoid becoming “this big monstrosity that doesn’t stand for anything.” It likely also helps that the brand has remained private.
Expansion Plans TBD
As for Carlyle’s exact expansion plans for Supreme, that is unclear at the time being, at least in part because representatives for the group have declined to comment on the deal. The good news for Supreme fans, at least as of now, though, is that the brand has a significant amount of room to grow within its own sphere of operation (it boasts only 3 stores in the U.S. and only 11 in the whole world).
This will almost certainly serve to keep it out of third party operated stores and therefore, will bode well for its street cred at least for now. There is no telling what will happen once Carlyle sells its stake in 3 to 5 years time.
What we do know is this: Supreme has managed to keep its cool up until now (for the most part), despite a handful of very corporate investments, which Jebbia has managed to keep quiet. As Hypebeast revealed this week, “This is not the first time Supreme has received outside investment to grow the business. Before the deal, sources close to the company revealed that private investors such as Keith Miller, partner at private equity firm Goode Partners, held a large stake in the company — perhaps even more than Jebbia himself. At the time of publication, Miller’s online portfolio states he is a board member of Supreme New York.”
Additionally, BoF reported this week that in 2014, Goode Partners, a New York-based private equity firm, took a minority stake in Supreme via two investment vehicles. This is a fact that was kept quiet by Jebbia, who said in an interview in 2016 said: “As a small brand, we do it all. We don’t need an investor.”
The difference this time around? Well, other than the vast size differential between any prior private equity involvement and the monstrous Carlyle Group? The cat is out of the bag – from the get-go – this time.
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