Ray-Ban Maker EssilorLuxottica Acquires Supreme in Strategic Move to Tap Streetwear Market

EssilorLuxottica, renowned for its iconic Ray-Ban brand, has announced a strategic acquisition of streetwear brand Supreme from VF Corporation (NYSE: VFC) for $1.5 billion. This marks EssilorLuxottica’s first foray into the apparel sector.

In tandem with this announcement, EssilorLuxottica revealed an 80% acquisition of Heidelberg Engineering, a German firm specializing in ophthalmic diagnostic solutions, enhancing its presence in medical technology. The financial terms of the Heidelberg deal were not disclosed.

VF Corp, owner of Vans and North Face, initially acquired Supreme in 2020 for $2.1 billion. The sale of Supreme is projected to dilute VF’s earnings per share in fiscal 2025, according to the companies’ joint statement.

Following the news, VF Corp shares surged over 8% in New York, while EssilorLuxottica shares fell nearly 4% in Paris by 1435 GMT.

For EssilorLuxottica, which has predominantly focused on eyecare and eyewear, this acquisition is an unexpected pivot towards the streetwear market.

“At a time when streetwear brands are experiencing declining consumer engagement globally, this move is quite surprising,” noted Bernstein analysts in a report.

According to a source close to the matter, EssilorLuxottica’s acquisition of Supreme aims to leverage the brand’s strong appeal among Generation Z and its robust platform for big data. The eyewear giant plans to maintain Supreme’s existing business model while potentially using it as a testing ground for new products and technologies.

The transaction is anticipated to close by the end of 2024. EssilorLuxottica, with JP Morgan and Latham and Watkins as its exclusive financial and legal advisors, emphasized that Supreme will enable a direct connection to a new demographic.

Known for its distinctive red box logo, Supreme has built a loyal following in the streetwear community, with its product launches often selling out within minutes and customers queuing for hours outside its stores.

“Supreme’s unique brand identity, direct commercial approach, and exceptional customer experience will complement our existing portfolio,” stated EssilorLuxottica CEO Francesco Milleri and Deputy CEO Paul du Saillant.

VF Corp’s strategic review determined limited synergies between Supreme and its other brands, prompting the sale.

“This transaction supports our program to better position VF for long-term growth and achieve more normalized debt levels,” said Bracken Darrell, VF’s President and CEO.

VF Corp is currently undergoing a turnaround plan, following a fourth-quarter loss and revenue shortfall reported in May. Supreme, which generated around $520 million in revenue for the fiscal year 2022-2023, operates primarily online and has 17 stores across the US, Asia, and Europe.