Is It Possible To Continue The Myth After Being Acquired?

For a long time, "Wei Mei" has been chased by consumers all over the United States and even the whole world. It is the "sexy myth" in the hearts of millions of people. Now, the "dream" is broken, and "myth" is no longer. The buyer is Sycamore, a private equity giant who once bought Staples, the world's largest office supplies retailer. How can it have such great ability and grasp the ability to buy secrets? Can it continue to write the "myth" for global female consumers?

"Angel" is not sexy.

Recently, CNBC quoted sources as saying that the Victorias Secret of the US underwear brand (Victorias Secret), the parent company L Brands, and private Holdings Company Sycamore Partners (hereinafter referred to as "Sycamore") have been close to issues related to the sale of secret goods, and will be announced as soon as possible this week. Roxane Meyer, an analyst at MKM Partners, a research firm, said that the chances of L Brands and Sycamore trading were very high. In other words, it may be a foregone conclusion.

It is worth noting that the above analysts expect the sale price to be about 2 billion -34 billion dollars, only half of the annual sales volume during the peak period.

Sycamore bought the "sexy myth" that was once pursued by consumers all over America and even the world. In fact, if you look closely at the assets of Sycamore, known as the "vulture" of the private sector, you will find that this kind of business is very handy.

01 industry vultures Sycamore

Sycamore is a private Holdings Company based in New York. It was founded in 2011 by Stefan Kaluzny and Peter Morrow. The two founders are from the United States another private company Golden Gate Capital founded in 2000. Kaluzny holds a Bachelor of Arts degree from Yale University and a MBA degree from Harvard Business School. Morrow has a bachelor's degree from Stanford University and an MBA degree from Stanford University.

Sycamore focuses on the consumption and retail industry, mainly investing in various private equity strategies, most notably leveraged buyout, bad takeover, complex corporate spin offs and debt investments. The company manages more than 15 billion dollars.

Sycamore has a history of L Brands's predecessor, Limited Brands. Sycamore acquired Limited Brands's Mast Globla Fashions (hereinafter referred to as MGF) shortly after its establishment in 2011, and now MGF has helped build a retail empire of clothing, including the clothing brands such as Talbots and "Sycamore" acquired by Sycamore.

In 2012, Sycamore bought us women's clothing retailer Talbots for us $391 million; in 2013, Sycamore privatized US apparel retailer Hot Topic Inc for $600 million; in 2014, Sycamore bought us women's online retailer Coldwater Creek and apparel group The Jones Creek at a price of 2 billion 200 million US dollars, and sold them in second years. In 2015, Sycamore spent $3 billion to acquire the largest family chain store Belk, Inc in the United States.

However, Sycamore's best known case is the acquisition of Staples, a global office supply retailer, at $6 billion 900 million in 2017. The deal was the largest leveraged buyout in the world.

02 the global office giant Staples

Founded in 1986, Staples is the first office supplies supermarket in the world. With the low price strategy, Staples quickly seized 50% of the US office consumption market. By 1999, Staples had identified its position as a global industry leader.

During its heyday, Staples's business covered 26 countries and regions, with more than 2200 stores, with an annual sales of nearly US $25 billion and a market capitalization of more than US $19 billion. In 2007, Staples ranked the Fortune 500.

But with the expansion, big business disease is gradually emerging. Since 2011, Staples's sales have begun to drop. Meanwhile, Staples is also shutting down its stores.

In February 2015, Staples struggled to buy $second for the second largest office supply chain in the world. However, the transaction was again rejected by the Federal Trade Commission on the grounds of antitrust, which led Staples to pay $250 million for ODI office.

In 2016, Staples suffered a net loss of 1 billion 490 million US dollars. In 2017, Staples accepted Sycamore's $6 billion 900 million acquisition. After the completion of the acquisition, Sycamore Partners has made appropriate reductions in Staples's retail business and has retained its strong "B to B" business.

By the end of 2017, the total annual rate of return of Sycamore reached 60%.

It is these past cases that have participated in the Sycamore Partners acquisition MKMPartners analyst Roxanne Meyer, said that the acquisition of the acquisition of the possibility of very large, Sycamore Partners's management is very supportive of the acquisition.

Meyer also explained the reason for the high success rate of the transaction. "According to the past acquisition history of Sycamore Partners, its acquired brands often survive in cracks, poor performance, unprofitable development and coercion in the market competition environment."

03 can Sycamore revitalize the "sexy" secret?

Like Belk and Staples, there is also a crisis.

The "sexy myth" began in 1977 to provide consumers with sexy, fashionable and romantic underwear products. The demand of underwear for consumers at that time remained at the most basic stage.

In 1982, the $5 million annual revenue was sold to the founder of Roy Raymond at the price of $1 million for the The Limited group, the predecessor of L Brands. The Limited is founded by the current CEO Leslie Wexner, and owns The Limited, Express and other clothing brands besides the secret. Under the commercial operation of Leslie Wexner, the expansion began in 80s, and the product line was extended to shoes, evening dress and perfume. The valuation rose to $500 million, which was 100 times that of the owner.

In 1995, in order to reach more consumers, Wei first launched the annual show that affected the whole underwear industry. Since the beginning of the first time, the attraction of countless male consumers has attracted many headlines. In January 1999, the show was first broadcast on the official website in real time, with more than 1 million hits in 30 minutes.

However, after entering the twenty-first Century, the design of WIM products was aging, and the brand image failed to keep up with the upgrading of consumers' mentality and aesthetics.

The industry has criticized the "sexy" marketing strategy for a long time, but this lingerie giant, which has been brilliant for 15 years, has not been able to face up to this fact. According to the report issued by Coresight Research, its market share in the US in 2018 has dropped from 31.7% in 2013 to 24%, while the market share of emerging competitors such as Thirdlove and Savage x Fenty has increased from 28.1% in 2013 to 36.2%.

Coresight Research pointed out in the report that the change of market trend and the continuous emergence of competitors are the main reasons for the decline in the performance of the company. With the rise of artificial intelligence and other technologies, the definition of sexy is evolving constantly. Comfort and fitness become their new demand for underwear. At the same time, sports brands such as Nike, Adidas and Lululemon are also invading the underwear market. The first three underwear products occupy 0.2% of the market share.

The biggest worry for the apparel industry is that they do not understand young people's preferences. The decline in attractiveness is directly related to income and profits. After sales of $7 billion 780 million in fiscal year 2016, its performance began to decline rapidly, and revenues in fiscal 2017 fell 9% to $7 billion 300 million. Wei's performance in 2018 also showed no expected improvement. Revenue continued to fall by 0.17% to 7 billion 375 million dollars, and its profitability declined again. The net profit of L Brands fell 34.5% to 640 million dollars year-on-year.

L Brands's performance has declined for the 4 consecutive quarter due to the drag on its density. Sales fell 2% to 8 billion 207 million dollars in the first three quarters of 2019, gross margin fell to 35%, net profit fell 41% to 113 million dollars. Among them, its sales fell by 6.5% to 4 billion 528 million dollars, while Bath&Body Works sales rose 11.7% to 2 billion 995 million dollars.

In the 9 weeks ended January 4, 2020, sales of L Brands continued to decline by 4.07% to $3 billion 906 million during the holiday season, down 3% from sales, with a 12% drop in sales. In the current fiscal year, sales of L Brands fell 2.76% to $12 billion 113 million. At the end of the reporting period, there were 1201 stores in the world, of which 22 were in China, and 45 stores were closed in the past year.

After Sycamore takes over, can Wei continue to "sexy myth" and become the lingerie queen in the eyes of thousands of young women?