The die was cast when private equity firm Carlyle Group reportedly shelled out $500 million for a 50% stake in Supreme in the fall of 2017. So the sale falls right within the typical three-to-five year deal time frame for an outfit like Carlyle, particularly when it comes to the cyclical consumer space.

The lack of surprise around VF Corp.’s Monday announcement that it was buying the burgeoning fashion brand for $2.1 billion reflects the recent alliances between Supreme and VF brands such as Vans and North Face. Those mashups surely figured in VF’s due diligence process before the offering was made.

Adding the brand to its apparel empire means VF was willing to pay roughly four times Supreme’s projected revenue for fiscal 2022, as well as a multiple of 15 times Ebitda (earnings before interest taxes, depreciation and amortization, which is a measure of cashflow). The deal equates to a significant pay day for Supreme founder James Jebbia as well as Carlyle.

The deal also poses a common question: how does a large conglomerate like VF Corp. integrate Supreme into its stable of brands while maintaining its new purchase’s “underground” and edgy streetwear cache? Supreme’s reputation as a pioneer of modern streetwear stems in part from its nimble nature. That stance may be harder to support once it’s no longer independent.

The answer can found in Supreme’s product drops. Its latest items include a mix of skateboards, a folding knife and a fish bowl. The retailer’s advertising also stresses to make bold points. In a kind of retro media move, Supreme ads recently served as the cover wrap for an edition of the New York Post. Lastly, celebrities from rapper Travis Scott to Victoria Beckham to the Kardashian-Jenner clan are frequently seen sporting the brand’s looks.

VF’s Fashion Fails

The purchase of Supreme can be considered as part of VF’s continuing metamorphosis. It’s spun off or sold legacy businesses such as its denim division, which largely consisted of Lee and Wrangler. At the same time, VF has added brands such as Timberland to its roster. Supreme bolsters the parent’s “retail-centric, hyper-digital business model,” according to VF, with the potential to be a $1 billion brand globally via international and direct-to-consumer expansion.

“While the terms ‘lifestyle brands’ and ‘authenticity’ get used and abused a lot in our industry, a quick scan of the VF portfolio confirms that each of their acquisitions has been able to retain the integrity of their original brand DNA and yet still comfortably fit within VF’s family of active-wear/accessory products,” said Hayes Roth, a principal at HA Roth Consulting.

“Supreme certainly meets this threshold as an ‘activewear’ VF brand and, by all past indications, VF will celebrate and support its authenticity while arguably professionalizing its management and marketing— as they’ve done so well for their other brands,” he added.

Supreme is a purely fashion brand, rather than one that’s in part driven by utility, like the outdoor-oriented shoppers of North Face. That form instead of function aspect poses a wrinkle for VF. To stay successful, it must remain relevant from season to season.

VF’s success with its other fashion-focused acquisitions have been mixed. For example, in 2007, VF acquired 7 For All Mankind for $775 million. That brand, along with Splendid and Ella Moss, was was eventually jettisoned for a fraction of that deal’s cost nine years later due to faltering sales.

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