This deal would be EssilorLuxottica’s first major push into the apparel industry.
EssilorLuxottica, the owner of brands like Ray-Ban and SunglassHut, agreed to acquire the streetwear brand, Supreme, for $1.5 billion from VF Corporation. This is marked as the first apparel company acquisition of the French-Italian eyewear maker. The Vans and North Face owner VF Corporation themselves paid about $2.1 billion to take over Supreme in 2020.
The CEO and chairman of EssilorLuxottica, Francesco Milleri said in a statement that they see an incredible opportunity in acquiring an iconic brand like Supreme as a part of their company. He also added that this acquisition aligns with their development and innovation journey and brings them in a direct connection with new languages, audiences and creativity.
Founded in 1994, the streetwear brand Supreme is well known for its limited run inventory that resells for higher prices on third-party marketplaces. In most ways the business strategy differs significantly from EssilorLuxottica’s, as their core product is eyewear, classic.
This deal would be EssilorLuxottica’s first major push into the apparel industry. Entering the younger customer base gives them a new category to explore. It further helps them to be identified as a fashion style brand which will in turn help the sales of their eyewear.
EssilorLuxottica promises to work towards preserving the identity, customer experience and commercial approach of the brand. “Supreme will have its own space within our house brand portfolio and complement our licensed portfolio as well,” Milleri continued in the press release. James Jebbis the founder of Supreme will continue to maintain his involvement with the brand even after the new ownership. The deal transaction is set to close by the end of this year subject to approval of regulators.
This acquisition came as a shocker as Luxottica is not an apparel company which on its own is a difficult industry to manage. The brand may face challenges to create a synergy between multiple categories under one roof. Ideally one apparel company takes over another.
Founded in October 2018, EssilorLuxottica was a merger of the French Essilor with the Italian Luxottica. The CEO of the brand, Milleri said that EssilorLuxottica is home to about 150 brands in the categories ranging from eyewear and lens technology during an April earnings presentation. In the same presentation the CEO credited the iconic brands for being one of the three key reasons for EssilorLuxottica’s long-term growth.
“Our house brands together with our long-lasting licences will support our growth in the years to come,” Milleri said, citing EssilorLuxottica’s desire to serve as an “ambassador of style and innovation to consumers everywhere.”
EssilorLuxottica houses brands that are strictly eye care focused chains like Pearle Vision, to more luxury brands like Oliver Peoples and Vogue Eyewear. Another brand on the list, Oakley also sells apparel in addition to sunglasses.
EssilorLuxottica is said to licence prescription and non-prescription for lots of luxury brands like Chanel, Prada, Burberry and Versace.
Since supreme’s first acquisition by VF its seen to not grow at the rate it hoped to grow at. The first fiscal year the revenue reported was $523.1 million whereas the target set was of $600 million and had seen a decline of $38.4 million from its previous year. In May, the company reported a lower than expected revenue and fourth-quarter loss.
The new ownership is predicted to be better for supreme as about 80% of EssilorLuxottica sales focuses on luxury which can prove to be beneficial for Supreme as it may be positioned alongside high priced merchandise. Simultaneously this could be EssilorLuxottica’s chance to reach and target the GenZ and tap into a new and younger target audience. The Supreme acquisition occurs during a dynamic M&A market. This opens the door for more unusual deals such as the one between VF and EssilorLuxottica.