James Jebbia’s fabulously successful skate brand Supreme is all about downtown cool and credibility, but it needed a shot of luxe cachet to nab a $1 billion valuation in its deal with private equity giant Carlyle.
Jebbia raised Supreme’s profile considerably with the Louis Vuitton collaboration this summer, which sources said drummed up 100 million euros in business for the pair, could have sold much more and gave the skate brand just the high-end sheen it needed. (Supreme and Louis Vuitton did not immediately respond on Thursday to WWD queries on sales of the collaboration. Carlyle declined to comment.)
The collection bore the marks of both brands, with many pieces featuring Supreme’s white logo wrought on bright red Louis Vuitton leather goods.
The line was first unveiled during Paris Men’s Fashion Week in January, but it wasn’t until the end of June that the cool kids queued up outside pop-ups in Paris, London, Miami, Los Angeles, Tokyo, Beijing, Seoul and Sydney to score (and in many cases resell) a piece of two distinct worlds coming together.
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“The success of that product in the minds of many people solidified Supreme as a viable luxury brand,” said attorney Douglas Hand, founding member of Hand Baldachin Amburgey, who focuses on designer businesses.
Sources said bankers had been shopping an investment in Supreme since at least early 2016, but a deal didn’t come together until just after the collaboration, which featured key holder bag charms for 195 euros and a made-to-order Malle Courrier for 50,000 euros.
Despite the prices, the product was sold — and apparently so was Carlyle.
Just after the Louis Vuitton x Supreme opened, Carlyle paid $500 million for a 50 percent stake in the company, according to sources, although the deal was kept quiet until last week when WWD first revealed the transaction.
At least a portion of the stake that traded hands appears to have come from Goode Partners, which bought into the company in 2014. Goode partner Keith Miller, who did not respond to a request for comment, sat on Supreme’s board and was given kudos by sources, who said his help was instrumental to the brand’s recent development.
Supreme looms large in the insider-y streetwear world, and now, with the Vuitton collaboration and the 10-digit valuation, in the broader fashion world. But it’s not clear just how big the company really is.
Outwardly, it has stores in Manhattan, Brooklyn, Los Angeles, London, Paris and Tokyo, a closely watched e-commerce site, wholesale at Dover Street Market and a steady stream of collaborations, having linked with Schott, Vans, Stone Island and more before connecting with Louis Vuitton.
Sources familiar with the company said it’s larger and much more profitable than it looks from the outside — it would have to be to justify the Carlyle deal’s rumored valuation at just under 10 times projected earnings before interest, taxes, depreciation and amortization of roughly $100 million.
That’s a lot of money for a brand built on scarcity and blink-and-you’ll-miss-them product drops.
The trick is going to be to maintain Supreme’s cachet while growing the business enough for Carlyle to eventually cash out, whether through a sale to another player or an initial public market.
Hand said Carlyle understands and tends carefully to brands, understanding that the corporate impulse can hurt the creative side.
“Carlyle has a good track record of not killing the golden goose that they invest in,” Hand said. (Indeed, Carlyle bought 100 percent of the high-end sneaker and luxe business Golden Goose Deluxe Brand earlier this year).
Supreme and its success, however, would seem to bring fashion and Carlyle into new territory.
“It does call into question the very notion of what luxury is today,” Hand said. “Supreme has offered a version of desirable items that are scarce and to many, that is luxury, to have that thing, to posses that thing that others don’t.”
And that, in turn, has made the company desirable.
“Supreme and what it represents, it’s very graspable by the financially driven mind,” Hand said. “It’s as simple as a supply curve and a demand curve and I think that’s part of their brilliance.”