Recently, American apparel giant VF Corporation (VF Group, hereinafter referred to as "VF"), the parent company of The North Face, Vans, Timberland, Supreme, and other outdoor and trendy brands, released its full annual report for fiscal year 2023 as of the end of March 2023. It disclosed for the first time the financial data of Supreme, a well-known New York fashion brand acquired in 2020, and detailed the impairment of its assets.
In the 2022 and 2023 fiscal years, Supreme's revenue will be US$561.5 million and US$523.1 million, and its net profit will be US$82.4 million and US$64.8 million, respectively. Based on this calculation, the net profit margins will be 14.7% and 12.4%, respectively. Between December 28, 2020, and April 3, 2021, Supreme's revenue and net profit were 142 million and 21.5 million US dollars, respectively.
Based on this calculation, after the acquisition, Supreme’s cumulative revenue was US$1.2266 billion and its net profit was US$168.7 million.
However, Supreme's revenue level is lower than the group's previous expectation of reaching US$600 million in fiscal year 2022.
Currently, Supreme is available in many countries and regions around the world through 15 flagship stores, selected retailers, and its own website, www.supremewyork.com.
It is worth mentioning that in September 2022, VF Group shared some important operating data about Supreme at the investor day:
As of the end of March 2022, there were a total of 14 flagship stores, including 4, 4, and 6 stores in the Americas, the Middle East, Africa, Europe, and the Asia-Pacific region. At that time, the six stores in the Asia-Pacific region were all located in Japan.
Online businesses contribute more than 70% of revenue. North America contributed more than 60% of revenue. 40 sales events per year. Clothing products accounted for 70%.
In November 2020, VF Group announced the acquisition of New York street fashion brand Supreme for US$2.1 billion. Brand founder James Jebbia and the original executive team will remain with the company.
After the acquisition, Supreme was divided into the leisure sports (active) section. This department also has brands such as Kipling, Napapijri, Eastpak, and JanSport. In fiscal year 2023, it achieved revenue of US$4.9046 billion, a decrease of 33.2% from US$5.3803 billion in fiscal year 2022.
In February 2022, Supreme announced the appointment of American creative pioneer Tremaine Emory as its new creative director. He is from Los Angeles, is the founder and designer of the high-end denim brand Denim Tears, and co-founded the trendy brand No Vacancy Inn with DJ Acycle.
At the analyst meeting, Matt Puckett, chief financial officer of VF Group, revealed that although Supreme sales declined in fiscal year 2023, they achieved continuous improvement in the second half of the fiscal year, with strong growth in the Japanese market and continued good performance in Europe, the Middle East, and Africa. China accelerated its recovery momentum in the third quarter and returned to positive growth in the fourth quarter.
Among them, the mainland China market that has just entered was specifically mentioned, saying that it "performed well." In November 2022, Supreme will be officially launched in mainland China, and the partner is the buyer store Dover Street Market.
Matt Puckett once again emphasized the three strategic pillars behind Supreme: increase brand awareness; expand new categories, especially footwear; and expand new markets, especially the Asian market, by opening flagship stores.
In February 2023, Supreme moved its store in Fairfax, the heart of Los Angeles street fashion, to West Hollywood and officially opened it with an area of 8,500 square feet.
In the full annual report, VF also mentioned two "potential risks" related to Supreme: the impairment of its assets and its distinctive business model.
VF Group explained the impairment of Supreme assets: Due to higher interest rates and foreign exchange fluctuations, as well as adjustments to financial forecasts, the company tested Supreme's trademark and goodwill values during the second quarter and the fourth quarter, of which the trademark in the second quarter In the fourth quarter, trademark and goodwill impairment charges were 148 million and 165.1 million U.S. dollars, respectively.
Based on this calculation, the Supreme asset impairment in fiscal year 2023 is 735 million US dollars. Affected by this, VF Group's earnings per share will fall from $3.10 in fiscal year 2022 to $0.31 in fiscal year 2023.
On the other hand, the group also stated that Supreme has adopted a completely different business model from other brands under the group, focusing on direct-facing consumers through frequent and weekly releases of limited products.
"Honestly, we still think Supreme is a successful acquisition, and we expect growth in fiscal 2024," added Matt Puckett.