Hey guys it’s Nef. I am deeply sorrythat I kept you guys waiting for so long. I have been going through a sombertime. Meanwhile, my own business was affected by the recent changes in thecapital market which kept me rather busy to deal with.

Besides, all the bonuseshidden in the english subs were slowly discovered by the careful viewers. I getthe feeling that you guys want to see more of it, so I will definitely do moreof that in the future for upcoming videos. Without further ado, let’s uncoverthe mysterious fa?ade of Victoria’s Secret.

The origin of Victoria's Secret

After 43 years of vicissitudes, thecompany built its skyscraper from the ground up, yet every tide has its ebb. Whenthe tide recedes, there will be no more hidden secrets. The story of Victoria’sSecret began with the story of Raymond, a Stanford graduate.

According to anearly memoir, in 1977, newly-married Raymond wanted to buy some lingerie forhis wife as gift. Yet, being a man, it was awkward to go to the store and purchaseladies' underwear in the public. So, he came up with an idea.

Certainly, manyboys had such concerns. Why don’t I just open a special lingerie store wheremale customers can walk in without embarrassment. Raymond borrowed $ 40,000from the bank and another $ 40,000 from his relatives.

The first Victoria'sSecret Store opened in 1977. The main goal of this store was to sell lingerieto male customers. We all say that only girls know girls the best. In the sameway, Raymond also understood his fella male customers the most and used thisunderstanding in his business.

To gain attention and improve sales volume, Victoria'sSecret updated the iterative old-fashioned underwear and oriented the underweardesign to a more personal and sexier style.

With eye-catching posters that temptedmen into spending money, Victoria’s Secret has made a name for itself. Sincethe idea was “traditionally-unwelcomed,” it was criticized by the media at thetime that his interior decoration and underwear style were not like a store butmore like a red-light district.

They all condemned Raymond for being erotic inhis branding, but Victoria’s Secret expanded rapidly in this unamiable mediaenvironment. You’d have to admit, Raymond’s strategy worked pretty effectively.

By 1982, Victoria's annual sales exceeded $ 6 million. Everything was going toowell that he even opened a few branch stores. Yet, the turning point came alsovery fast. He thought it was just the beginning, but it was actually thepinnacle.

Sales volume over 6 million did not actually bring a lot of profit.Besides, due to Raymond ’s aggressive strategy to increase leveraged loan and expansion,high borrowing costs impeded the company from moving forward. Also, as a chainstore that sells women underwear to men. Its sales strategy also tended toguide men and serve men.

Customers who walked in all had a “fantasy” in theirheads or an imaginary friend with it. This excessive one-sided strategy madethe target category of customer very limited. Solely male customers with“fantasy” could not satisfy Victoria’s Secret’s growth rate. Back then, Raymondfelt awkward to go to the mall to buy lingerie by himself.

Yet, the brand hefounded carried out another extreme. An extreme which aimed at attracting malecustomers at expense of female customers. The result of this strategy was thereduction in the number of female customers.

With the existing bottlenecks in thegrowth of male consumption, after a period of expansion, the situation began toreverse; sales volume was weakened, and deficit started to emerge. Meanwhile,the enterprise itself was loaded with liabilities. The cash flow was hanging atthe cliff. Facing this deteriorating situation, Raymond started to make somemove.

Victoria's Secret Step one

At this time, another key character of Victoria’s Secret came into thestage—a lingerie businessman named Wexner. Wexner was of something big at thattime. His own company was listed on the New York Stock Exchange in 1982. Thatenterprise was the L Brands now day. The cash-rich L Brands searched forcompanies with various cash flow problems in the market hoping to take theadvantage with low cost. Does this sound familiar?(Recall Arnault fromLVMH) Wexner started bottom fishing in 1982, yet Bernard Arnault onlystarted to do this since 1988. Wexner was the “true founder” of bottom fishing.

He came to Victoria’s Secret’s founder Raymond hoping that he could acquireVictoria’s Secret. Raymond had the intention to arbitrage all Victoria’s Secret’sstock and left the company, but Wexner has been pushing down the price as thebuyer. I mentioned this before when talking about malicious mergers andacquisitions. If more buyers are introduced in M & A which then cause amulti-party bidding situation. This was for sure, better for Raymond, butRaymond found that except Wexner there was not another decent buyers for him tochoose in the market.

Facing the worsening situation of Victoria's Secret, Raymondwas both anxious and sullen. He was afraid that Wexner would give up theacquisition then his company would be really dead. Raymond had no choice but toaccept the bargain. Wexner eventually acquired and owed 100% of Victoria’sSecret’s stock and most of its debt with just 1 million US dollar.

Wexner hadbecome new boss of Victoria’s Secret. L Brands owed various different brandsother than Victoria’s Secret. In the following years, Victoria’s Secret becamea black horse. Wexner has also become a legend with his successful acquisitionof Victoria’s Secret’s with just 1 million USD.

We will talk more about peoplelike Wexner in the future. Some had plummet from the mountaintop to the valley.Yet, some had clamber up from the abyss up to the peak. According to Wexner'smemoirs and related interviews, he stated that he saw Victoria’s Secret’sproblem long time ago.

This was also a major philosophicalproposition—should we empty the wallet of boys or girls? Wexner answered tothis immediately. So, he transformed Victoria’s Secret’s brand appearancedramatically after taking over it. He removed all the provocative elements thataimed to ingratiate men. He referenced to the European luxury brands by leadingVictoria's Secret toward a more luxurious and noble route.

All Victoria’sSecret’s stores were renovated in accordance with the luxurious style. Theirmain customer target also shifted back to females. Wexner then advertisedvehemently trying to bring out all the charm and luxury fantasy that women candream of. Since then, the sales volume and profits of Victoria’s Secret haveskyrocketed. Three years after the transition, the company’s valuation hasdoubled several times.

Wexner was guffawing. Wexner, thesecond leader of Victoria’s Secret, the master of acquisition was also talentedat selling his products as well.

Why did Victoria's Secret founder commit suicide？

In contrary to this was the tragic situationof the founder of the company—Raymond. After Raymond sold Victoria's secret for1 million dollar, he then created a high-end children's products brand withpart of the funds.

However, due to geographical location, sales strategy andpricing issues, the brand has not been appreciated by the market. There werealmost no sales after the launch and the brand suffered continuous loss althoughRaymond put a lot of effort into the new brand. The fate of bankruptcy wasinevitable eventually as this would not last in the long run. Yet, Raymond didnot give up. He continued to borrow money to start businesses but none of thefollowing project became successful.

At this time, Raymond was already piled upin huge debt. He was breathless with all kinds of debt on the shoulder. Raymondhoped to realize his business dream through capital and leverage, butsuccessive failures gradually depressed him. His life also went fromextravagance to frugality. (Hell Mode activated) When darkness befell, days andnights became boundless.

These misfortunes and heavy debts defeated himcompletely. He and his wife divorced in 1986. After continuing to struggle forseveral years, he chose to jump over the bridge to commit suicide in 1993. Iwent through the news at the time. This is the one from the New York Times. Theresult of a police investigation was indeed suicide, at an age of 46. In theU.S. at that time, there were actually many examples of this kind of unsuccessfulleverage expansion that has been devoured by capital.

Yet, Victoria’s Secret’sfirst and foremost founder’s death was too “magical realism.” It just happenedto be in the same year, Victoria's Secret became the No. 1 lingerie brand inthe U.S. Wexner could not be better off with the fame and money he wasreceiving.

As for Raymond—hopeless life, broken family, misfortunate ending… Thiscompletely different endings for the two leading actors made me wonder that realityis always more “magical” than in the movies. This also reminds me of the phrasethat I mentioned in the previous video from Roman Roland, “There is only oneheroism in the world: to see the world as it is, and to love it.”

How did Victoria's Secret become world famous？

Let's go back to Vitoria’s Secret. Thegeneral shape of the future Victoria’s Secret began to emerge. By 1995,Victoria's Secret had opened hundreds of stores across the United States. Inthe same year, the world-renowned Victoria’s Secret Show was born.

The originalintention of the show was to implant the sexy and luxurious brand image deeperinto consumer’s mind. This was a smart way of marketing strategy. The 1995Victoria's Secret Show only had a budget of $ 120,000, but because of its goodmarketing effect the show continued.

Although Raymond introduced the “sexually arousing”branding technic earlier in the days, Wexner had bring this to another wholenew level. Why’s that? In 1999, a clip of Victoria's Secret Show was put in aSuper Bowl Ad for 1.5 million USD. Super Bowl was like the American sports"Spring Festival Gala." Playing few clips of Victoria’s Secret duringthis was like seeing Trump landing on the Sun, American audience had never seenthis before.

They then fell in love with it right afterward. The show was eveninterrupted because of too many viewers. Victoria’s Secret became hella popular.Everyone started to follow the trend. A clip of Victoria’s Secret’s show evenbecame a scarce resource that you could show off to your friends. If you dohave a tape, share it with us, good things should be shared together right bro?(Send me via email) As for the famous Fantasy Bra and Angel’s Wing, they bothdebuted in 1996 and 1998 respectively. These two elements set the universal tonefor the Victoria's Secret Show.

Fame often came with lots of debatesand question. Despite the “sexually sensitive” suspicion, there was complaintfrom the animal protection association on the materials used, some protestorseven rushed into the runway; parents and religious groups considered Victoria’sSecret as “soft porn” and it should not be streamed on TV.

In fact, from thebeginning when Victoria’s Secret set its tone till the day when it becamefamous. Critics has always existed therefore Victoria’s Secret grew up in anenvironment full of criticism. Every time such a dispute arose brought moreattention which means more sales volume. As a result, the stock price and marketvalue of the parent company—L brands inflated and rose rapidly. Take a look atthis graph, from 1995 to 2000, the stock price escalated from $3 to $8.

The Age of the gods

In thefollowing 2003-2006 period, Victoria’s Secret came a small peak of its life. Thisperiod was also known as “the Age of the gods.” The quality of the show droppedespecially after some sort of KOL came to the runway. Trolls, or keyboard menwould join the comment section with their keyboard to start up a fight. Thereason why people say that was, of course, there was a huge difference betweenthe early period and late period. In contrast, the professionalism of themodels from the “Age of gods” was obvious.

From the 90s to the “Age of the gods.” Thebasic style of Victoria Secret Show was established. Some say that thesupermodels made the show while others say that the show made the celebrities. I’drather they were like complement to each other. For example, Gisele Bündchen,one of the representatives from the “Age of gods.” Her contract price was saidto be $25 million in 2000. Think of that in the age of 00’s. In 2000, sheperformed “The Red Hot Fantasy Bra”(not on the runway) That name sounded fancyisn’t it? Like an item dropped from the boss character from an online game.

“TheRed Hot Fantasy.” You definitely get extra damage and life steal with that.This could definitely make you walk like a boss. The bra was listed at $ 15million. It was also recorded by Guinness World Records as the most expensiveunderwear ever. This also reflected that the status and role of Bündchen in Victoria’sSecret could even affect the capital market.

When the rumor that she broke upwith Victoria’s Secret spread out, L Brands’ stock price plummeted. Inaddition, there are many similar cases. For example, Heidi Klum, whom had anannual income of 16 million US dollars. In the 2001 big show, she wore aFantasy Bra that worth $ 12.5 million. Such as Tyra Banks the wild, NaomiCampbell the fairy, The Czech star, Karolina Kurkova, also known as the Silly K,and finally, Angela Lindvall, the ultimate hand-twister.

I could go on and onwith the list. These models stood on the top level of the pyramid. Their fan,or follower volume were imponderable. The influences that these top models hadwere still insane even in the late period.

According to the data from 2015, thestatistics on the number of Instagram followers of the girls could easily go upto few millions or even hundreds of millions. Every model has become their ownIP. They made Victoria’s Secret show a fantasy, and the show made them thefairies. Meanwhile, the mega show was like a religious activity that madepeople buy stuff. The luxury and sensuality created by the Victoria's Secretsupermodel directly stimulated the consumer's desire for consumption. Alongwith the bombing of consumerist propaganda in various media, Victoria Secrethas then become a label, a token.

At least back then, Victoria's secretfigure has become the major aesthetic standard of most people. Which girl doesnot want to live a life like a Victoria’s Secret’s angle? The whole thing wentwell afterwards. Based on the overall sales data, which is in this graph.

Between2010 and 2016, there was a 41% increase in global sales under Victoria's Secretand the revenue of Victoria's Secret sector accounts for the major income of LBrands with over 60% every year, that is the orange part of it.

Which means,among various brands, Victoria's Secret contributed more than half to L Brandsof its aggregate revenue. Let’s look at the stock price and valuation over thesame period. On top is the stock price, and the bottom is the company'svaluation. The stock rose from just a few bucks up to 79$. At the same time themarket value has been rising. The market value has also risen from 4 Billionsto 28 Billions at the end of 2015. The stock price has more doubled almost 10times. The parent company valuation also increased 7 times. Victoria was indeedthe highlight of the stage. From the initial scale in the 90s to the glorious “Ageof gods” and then the continuous, rapid growth for dozen of years. Victoria’sSecret was dedicated at building its empire. Wexner, the “bottom fishing” oldbastard originally bought VS for just 1 million. Yet it has doubled so manytimes. You probably don’t know what it means to win 10 billion with only 1million. It’s INSANE.

Everyone was fascinated by the sexyluxury of Victoria’s Secret. Just like the stars that bend towards the moon,this voluptuous lifestyle was a world with splendid appearance and attractivewealth that everyone dreamed of. It’s a symbol of fame and influence. You caneven call it a springboard to change destiny through marriage, but below thebrilliant appearance were various hidden dangers and problems. Wexner and hismanagement layer were immersed in the carnival. That they even became arrogant.The inflation of mentality was reflected on their behaviors. Take a guess and imaginethis, when you became a fashion or model star. Under the endorsement of status,rights and wealth. In the Vanity Fair which is full of flamboyant and carnalpleasure. Let’s see what would happen next.

The decline of point for Victoria's Secret

The resting water finally started toswirl in 2016, Victoria's Secret global sales began to show negative growth. Thatis the column in 2017. Although it didn't drop much here, it became animportant turning point. The 2018's global sales volume was better than 2017. Theywere basically at the same level and there was not much of a downtrend.

We cansee what’s wrong by considering from a different angle. Consider the impact ofnew/closed stores and look at the average sales per store area. The downwardtrend was obvious. The declines in 2016 to 2018 were crystal clear at a rate of10% -15% each year.

The mega show also experienced a turning point. Accordingto Nielsen data, from 2012 to 2014, the audience volume was generally around 9million. Yet, in 2015, it began a cliff-like decline down to 6.59 million. In2017, which was the show held in Shanghai, the number of viewers declined to4.98 million. In 2018 it fell to an all-time low of 3.3 million views. TheVictoria's Secret Show 2019 was even suspended.

Of course, the official had itsown wordings. Personally, if I was the decision maker, I would definitely stopthrowing money in. The new generation became the main fashion consumer groupand this “luxurious and luscious concept” did not play well on them. Consumerismand superiorism were no longer tenable. It’s just the same old word. You choosewhat you want to wear but not the opposite. Looking good and comfort experienceare what matter the most. Victoria’s Secret was, of course, the king inmarketing.

However, when specified down to each individual product. Itscomfort, design and aesthetics reviews were different among consumers. Coupledwith frequent management reshuffle, the company policies therefore changed veryoften. Probably Victoria’s Secret itself was unsure of its future.

On the otherhand, Victoria’s Secret was digging its own grave. When Victoria's Secretrealized its decline in fame and sales volume. They decided to start a battleto defense its fame and attention. They have the influencer come on the catwalkand replace some of the professional model. This irritated the loyal old fansof Victoria’s Secret. The answer was very simple, “influence” is king.

Althoughinternet KOLs could bring attention but their professional level cannot comparewith the original supermodels. The flaws and problems were crystal clear oncethe two were compared. Put these people on the stage of Victoria's Secret alsoreflected the dissimilarity in professionalism. In short, the cost of bowingdown to KOLs was the expense of professionalism.

After being questioned about skepticismon comfort and design. Professionalism was not guaranteed now. In addition,international public opinion has also shifted. People began to realize thatmodels should not just be thin and tall. All sorts of body shape should beappreciated. After all, most consumers' bodies cannot be as professional as themodels. The former CMO of Victoria's Secret has made inappropriate commentsabout the model selection criteria. You can also go and check the commentsection on Instagram to have a feeling of what foreigners think of this.

Thecollapse of public opinion was irreversible. Even after the Victoria’s Secret madesome compromises in response to public opinion. Neither “large” size models nortranssexual models could save Victoria’s Secret. All of the above has causedthe glittering Victorian Secret to sink into the mire. The splendid Victoria’sSecret began to fall away. Wexner was not happy at seeing this. However, what’smeant to come would eventually come, the final negative effect feedback wasshown on data and financial results.

The market share of Victoria’s Secret inthe U.S. dropped from 31.7% in 2013 to 24% in 2018. Let’s dig deeper on thefinancial data. The net profit after deductions has shown negative growth since2016. Then the figure accelerated all the way down. It was around 1 billion in2016 and 2017. In 2018, only 740 million was left. Last year, it was only 350million. This was the data after deduction, if the non-operating expenses wereincluded. It would not be 350 million surplus, but rather 370 million deficit. Netprofit after deduction was simply just the profit after removing the“on-operating expenses/income.

To examine the profitability of a firm, theunsustainable and non-operating expenses/income must be taken away. The moneymust be gained from your real business. Say, if an enterprise sold its buildingfor 20 billion and received a government subsidy of 3.3 billion. Then this 23.3billion was unsustainable or not related to the main business. So, it does notaccount for the profitability.

On the other hand, if the company’s factory wasdestroyed during an earthquake. This loss also does not count. There was alsotax deduction, provisions for asset impairment were included in non-recurringgains and losses. L brands had a deficit of $ 720 million on non-recurring P& L last year. The official also stated that the 7 billion was theimpairment of Victoria's Secret’s goodwill and stores. Yeah, “goodwill” comes again.You just have to remember that, L brands' overall financial data was deterioratingat a rate visible to the naked eye. Actually, it has been saving itself since2017 by actively exploring and expanding the Chinese market.

In 2018, Victoria'sSecret closed its century-old luxury retailer brand Henri Bendel, La Senza, theCanadian underwear brand, was also sold in 2019. The divestment of these assetsreturned some cash flow. In October 2019, they announced another 15%retrenchment of Victoria's Secret’s staff. The base-layer employees were reallymiserable. Other departments of L brands were also hanging at the cliff. Thewelfare bonus was not as good as before. Instead they say: young people who canstay in L Brands is a blessing. We must go through this hard time together. LBrands' series of operations was both embarrassing and ineffective. The capitalmarket also made its own choice. L Brand’s stock price has entered a downwardchannel since 2016. The upper half is the stock price, and the second half isthe valuation. The stock price fell from more than $70 that year to only around$10 now. The valuation has also fallen from 28 billion to 4 billion.

Let's zoom out a little bit. You cansee the history of this brand was like riding a roller coaster. Victoria'sSecret brought us a vivid exemplar of how a skyscraper falls. It can also beseen from the analyst ratings from various major foreign houses. No matter fromwhich dimension, everyone's attitude towards it was quite pessimistic for thepast whole year.

Victoria's Secret insider scandal

It never rains but it pours. The extravagant managementlayer finally got involved into serious scandals. Yeah, finally. Many people inthe industry think this was just a matter of time. New York Times launched areport on February 1 which exposed several inside stories of Victoria's Secret,the main complaints include language insults to models and staff; dirty executives/photographersand even selling of nude photos of models; executives attempting to threaten amodel's career by asking for intercourse, etc.

In fact, these things were notstrange in the fashion industry. It's not surprising that Victoria's Secretcould have such a scandal. It was probably just the tip of the iceberg. Now wehave to mention Wexner's former close friend and financial adviser: JeffreyEpstein. Epstein was accused of having sex with multiple underage girls in 2005.The youngest was only 14 years old. After lengthy investigations and mediations.Finally, he reached a plea agreement with the prosecutor and was sentenced toprison for 18 months. Such short sentencing has also caused huge controversy inthe society.

According to relevant reports and litigation documents. Epsteinnot only uses sex and related videos to blackmail and control victims. He also"loan" the victim to other powerful men. The amount of indictmentsand various materials were massive. The contents inside were also shocking. Thepolice not only suspected him of sexual assault, sexual abuse and pedophile. Healso arranged sexual transactions for the top politicians in the U.S which alsoinvolved several underage women. In addition, Epstein often swaggered under thebanner of a Victoria's Secret’s agent. He has also been accused of sexualassault at Wexner’s house.

This kept everyone guessing whether Wexner orVictoria's Secret models have been involved in these scandals as well. Wexner immediatelymade remarks and cut his relationship with Epstein. According to the New YorkTimes report and Newsnight interview, Current president Trump, Former PresidentClinton, Prince Andrew of England all certain had contacted with Epstein.

Ofcourse, they both later issued statements to cut their relationships withEpstein. However, Epstein just had too much cases on him. Tons of lawsuits havebeen withdrawn or settled out of court. Money can really solve problems. UntilJuly 19, FBI found new evidence and arrested him. Now you have to go to trialthis time and let the truth be revealed right? Yet, “magical realism” happenedagain. Epstein was found dead alone in his cell on August 10, 2019. Theforensic doctor said it was a suicide, but the strangest thing was, there justhappened to not have enough guards that day and patrols was reduced. The camerawas also broken, for no reason, so not video recording either.

Anyway, allkinds of special situations happened on the day of suicide. Investigation wasimpeded. His lawyer claims that he has been in a good spirit lately and couldnot possible commit suicide. This ball kept being kicked back and forth. Ithink we may never know the truth. However, regarding his complicatedrelationship with many celebrities and considering the sex scandal he wasinvolved. My subjective judgement is: if it weren’t suicide, then he must deadbecause of knowing too much. Epstein's death also took away a lot of unknownsecrets. Think of the description and allegations of him in the lawsuit, thesesecrets could swirl the politics circle, companies, the fashion industry, oreven the mainstream values. I am just making my guess, so don’t “take them asthe standard.”

From the New York Times' exposure of thatVictoria's Secret to the scandals in history. Compared with the glory of thefashion circle, they have provided another viewpoint for us to look at thiscircle. Let’s go back to Wexner and his company. Wexner was 82 years old. Themanagement layer was almost the same age as of your grandpa.

As they have beenalready in the hot water financially, along with the debt and cash flowpressure and the irreversible market downturns and bleak prospects. Thetargeted “harvesting” consumer group was not performing satisfyingly. Forgetit, I will just sell the company. Any rejections? Supports? Now it seems thatas early as last year L brands have decided to sell Victoria's Secret andstarted negotiating with other parties very early.

There were some gossipsspreading over. The deal was eventually announced last month. L Brands sold 55%of Victoria's Secret shares to a private equity firm for $ 525 million. At thesame time, Wexner himself resigned. Some analysts say that even Wexner wasretired, it is still very likely to retain his influence in L brands and Victoria'sSecret. With this price, the overall valuation is just a billion. Whethercomparing to the previous peak or the current market value. That was adirt-cheap price.

The stock price plunged a maximum of 7% on that day. Wexnerhas descend from the alter. The glory of fame and wealth also diminished. Thestrategy of this private equity firm was to acquire various struggling brandsin the market after I looked it up. They have done this several times before. Wexnergot Victoria's secret from Raymond at a low price. Now a private equity firmwho is better at doing this had collected Victoria's Secret from Wexner at alower price. No one could escape the pre-destined fate.

Arnold surely knowsabout this. Although this privatization transaction retains the possibility ofturning the tide. They even want to restart the show in another form, but italso depends on whether the market holds expectations. Looking back at theenthusiasm and the “Age of gods.” The sumptuousness and splendour thatastonished all of us will never come back. The company itself was just like itsmega show. From the legendary “Age of gods” to the inglorious scandal andshitty performances.

It has gradually become a used tool and toy of capital. However,a bright future is always worth looking forward to. Although Victoria has leftthe show, but her Secrets will stay on the stage forever. The fashion industryis still competitive, new players keep joining this vanity fair. Moresophisticated capital power and freshers looks has entered the stage while Victoriais fading out. The past glory and accomplishment are precious especially when theyhave been taken away by the time.

Capital never slumber, C U