Supreme's recipe for success is a simple one. Make good product, put it out consistently, and ensure the supply outweighs the demand. It's a formula that's helped propel the label from niche skate shop to global brand in 22 years.

Its relationship with high fashion started out on the periphery, on the backs of in-the-know editors, stylists, and artists for a few years, but now it's a mainstay in glossies like GQ and Vogue. And high-profile collaborations with labels like Louis Vuitton have cemented its legitimacy in the fashion industry.

The storied New York label recently revealed its most important partnership yet, and it has nothing to do with clothes. Earlier today, BOF broke the story that Supreme had sold a 50% stake of the company to private equity firm The Carlyle Group. James Jebbia confirmed the deal, but not the terms around it, though it's speculated that they paid $500 million for their half of the company.

What's more, BOF reveals that Supreme has had outside help since 2014, when New York private equity company Goode Partners took a minority stake in the label. WWD has since speculated that Jebbia sold 50% of his business to Carlyle for $500m back in July, and that the company has been valued at over a billion dollars. Though what's more likely is that Carlyle bought out Goode Partners, who still walked away with a very healthy profit.

This news puts Supreme's recent efforts at expansion into context. It expanded to Europe in 2014 with an EU e-commerce site, followed by shops in London and Paris. As the Instagram generation came of age, mile-long queues of teens took over the streets outside Supreme's small network of retail stores.

The scene outside Supreme's original Lafayette location has become more of a tourist destination than the community skate shop it was founded as. That's one of the reasons the brand had to open up a second NYC shop in Brooklyn, another reason being an immediate need to take the pressure off its unhappy Soho neighbors.

“We’re a growing brand, and to sustain that growth we’ve chosen to work with Carlyle, who has the operational expertise needed to keep us on the steady path we’ve been on since 1994,” said Jebbia in an exclusive statement to Business of Fashion. “Working with Carlyle allows us to concentrate on doing what we do best and remain in control of our brand, as we always have.”

For a brand that's remained fiercely independent since its inception, this is clearly a game-changer, despite Jebbia's assurances that it'll be business as usual. Private equity firms don't give out money for nothing—Carlyle will be wanting serious returns on their investment—and that means Supreme will have to get a lot bigger in order to meet the firm's expectations.

For a brand whose business is built around exclusivity, the question is how to maintain its homegrown authenticity while growing its business globally. It also calls into question whether a significant increase in supply will affect the aftermarket price and demand for its items.

”My initial thought is that it won't change anything from a brand standpoint,” says Josh Luber, founder of StockX. ”The whole point of [Carlyle] buying into that business is that after 22 years, they want them to keep doing that. They see that there's enough opportunity without making it corporate or trying to go too big.”

The secondary market for Supreme is vast, and a lot of people out there are making serious profit from exploiting the brand's limited supply. Covetable items like its Canadian fleece box logo hoodies retail for about $150 and sell out instantly, with certain colorways like olive-toned sage and peach demanding aftermarket prices of $1,800-$2,000.

In order to deliver on its new financial obligations, the label will need to ramp up its production numbers and consider opening up its distribution model (outside of Dover Street Market, Supreme currently does not wholesale).

”From a pure supply and demand standpoint, the fact the premiums are so much greater means that there is room for them to put out more supply and not ruin the exclusivity and the rareness,” says Luber. ”You don't need a hoodie to be 10x retail. If it's 5x retail on a secondary market, it's still really rare and expensive and hard to get.”

One change that Luber does foresee however, is more retail stores opening around the country, and possibly an increased infrastructure to reinforce its successful e-commerce business. John McPheters, co-owner of $115 million/year sneaker consignment store Stadium Goods, which just expanded its business to Europe through a partnership with Zalando, also sees more Supreme retail outposts in the future.

Industry speculation says that Supreme turns over million dollars on an average Thursday, without breaking a sweat. WWD also speculates that Supreme makes a total of around $100m per year, after taxes, depreciation and the like. Think of the kids outside the reach of Supreme’s physical stores — not just Michigan, Yorkshire and Provence, but Turkey, Russia and Iceland — all of whom have access to Supreme via its e-commerce platform. That’s a lot of people that are taking part in the weekly digital checkout sprint.

”The Carlyle Group is really heavy into commercial real estate development,” he says. ”Supreme's only in a set number of cities, and there are a lot of people that want Supreme all around the world. So, I wouldn't be surprised if a good chunk of that [investment] goes to really blowing out their retail footprint.”

But McPheters doesn't see more stores as necessarily having a detrimental effect on the resell market. ”In my mind, that doesn't change anything as it relates to resell. It's just giving more people access to products that are sought after,” he adds. Stadium Goods also sells aftermarket Supreme product in its store.

Ironically, Supreme now has more in common with the luxury brands it initially aspired to than any of its perceived peers in the so-called ”streetwear market.” The demand for its most covetable pieces tends to stay the same, and supply is scarce, causing the aftermarket price to remain relatively high. This makes it more akin to a ”Veblen good,” in which luxury products are actually more in demand when the price rises.

”Luxury generally is scarce, meaning it's not for everybody,” says Ryan Babenzien, founder of shoe company GREATS. ”What Supreme does is take luxury-like quantities and apply it to streetwear, and that's what created a brand that's an anomaly I don't think you can ever recreate. The scarcity component of it is probably what's made the secondary market so wide.”

This is the balance Supreme has mastered, whereas companies like Nike and Jordan Brand have struggled with oversupplying the demand for the past few years, which according to McPheters, has hurt them a bit (and the fact that adidas recently overtook Jordan Brand as the number two sneaker brand in the United States can attest to).

”If you look around the world at who the best is at managing that supply and demand, Supreme is top of the heap in a lot ways,” says McPheters. ”That's part of what they manage so closely, and I think they're smart enough to go about it in such a way that it's not flooded to change that aftermarket value.”

At its core James Jebbia emphasizes Supreme's commitment to good quality and reasonable retail prices. That likely won't change. Perhaps the most immediate development will be the opening of more American flagships—that shouldn't harm the brand's street cred when you remember that Japan has a total of six Supreme stores.

Beyond that, it's highly likely that Carlyle Group's involvement will lead to Supreme eventually being sold to a corporation, or going public via an IPO. Ironically, private equity firms like Carlyle make their money in a similar way to a streetwear reseller. They buy companies, then restructure them to maximize their profitability, then sell them on to a larger corporation or take them public via an IPO, typically within three to five years.

If the latter option comes true, then streetwear heads will be able to get their hands on the most insane product yet: Supreme stocks.

Now check out the story behind Supreme's first investment partner.