Somehow both of these things are true at the same time: Supreme sells $40 graphic T-shirts to hyped-up teenagers, and Supreme is worth one billion dollars. The former, you already know: since opening in 1994, Supreme has blossomed from standoffish streetwear brand that flagrantly knocked off giants like Louis Vuitton to Louis Vuitton-collaborating behemoth. The latter comes from a report in WWD. That valuation follows Friday’s news that Supreme sold a 50 percent stake in its business to the Carlyle Group for a reported $500 million, and raises a number of questions. What does this mean for the brand? How will money change it? And, most critically, how will that first truism reconcile with the second?
To put that $1 billion number into context, you almost have to look outside the fashion industry. The Wall Street Journal keeps track of other companies in this ballpark with something it calls the Billion Dollar Club. It’s a valuation only 168 companies, as of September 2017, have reached. The number puts Supreme in the same neighborhood as Shazam, Eventbrite, and Warby Parker, all of which were valued between $1 and $1.1 billion. What does it take for a cult streetwear brand to be as valuable as those household names?
It’s no secret that Supreme is incredibly popular in the world of streetwear, with pieces often reselling for multiple times the original retail price on sites like Grailed. But it’s almost unfathomable that with 11 stores (six of which are clustered in Japan) and its online shop, Supreme takes in the amount of revenue to be a legit $1 billion brand. When Warby Parker got its $1 billion valuation it was bringing in “well over $100 million” and planned to use the cash to expand its retail footprint. When Michael Kors sold a stake of his company in 2011, it was valued a bit above Supreme, at $2.5 billion—and reportedly generated 25 percent of the entire accessories industry. Supreme’s massive investment suggests that the Carlyle group is betting on future production: the idea that Supreme can corner something like its own 25 percent of the rapidly expanding streetwear industry. Or, in other words, that Supreme can become the Michael Kors of menswear.
That’s a great sentence if you’re a Carlyle executive, but a terrifying one if you’re a Supreme diehard. Supreme painstakingly built its brand by keeping stock extremely low, letting crowds of customers line up around the block, and expanding incredibly slowly. But it can’t stay the same hyper-exclusive, niche, and exclusionary brand if it wants to make good on this valuation because you need to sell a lot to make a lot. We don't know for sure what the brand's current earnings are, but WWD reports that the valuation is based on the firm's projection that it could take in $100 million annually—what WWD says is "presumably a decent step up." The brand is clearly gearing up for expansion—starting, perhaps, with its recent move into Brooklyn—which founder James Jebbia hopes will make the brand at least a little less difficult to buy. Many have pinpointed China—a massive market served by zero Supreme shops—as a place that Supreme could mass-open stores the same way they’ve done in Japan. That’s obviously speculation, but the Carlyle Group’s $500 million cash infusion could help Supreme snap up real estate at a pace the brand couldn’t afford independently.
It seems inevitable that Supreme will become a larger brand thanks to this investment; a private equity firm like Carlyle doesn’t have time to screw around with a cool but still-cult brand. Other companies in the firm’s portfolio include Dunkin Brands Inc., Dr. Pepper/Seven Up Bottling Group, and Golden Goose Deluxe Brand (the creators of your favorite pre-sullied sneaks). These companies have found success by projecting as universally accessible in a way that’s antithetical to Supreme’s ethos.
Supreme, meanwhile, remains largely untarnished in terms of its “cred,” but has shown the potential for explosive growth. Forget the aforementioned opportunities in China. It only takes one trip to the brand’s store in Soho to see that the demand greatly, greatly outweighs the supply here. Which raises the most interesting question about the valuation. If everyone who wanted to buy Supreme item was able to, would that make Supreme a billion-dollar brand? Maybe. But if everyone who wanted to buy Supreme was able to, would anyone want to anymore? Over the next couple years, Supreme will be the best case study we have to see how important scarcity is to a brand’s popularity and desirability. For now, the brand has to deal with a sort of catch-22: if scarcity is what made you so valuable in the first place, are you still a $1 billion brand when you start acting, and selling, like one?