Commercial Awareness: Victoria’s Secret, Jeff Bezos, and Heathrow Expansion
Welcome to Sanctuary Graduates’ weekly Commercial Awareness series designed to help students and graduates improve and prepare for the dreaded commercial awareness question in your interviews. The posts summarise the week’s headlines and updates in the commercial sphere. We hope it’s helpful in improving your commercial awareness in an easy to read, digestible format! This week our post covers: Victoria’s Secret’s privatisation; Boeing’s support of tax breaks ending; Morgan Stanley’s biggest deal since the financial crash; as well as Daejan Holding’s lack of female board members; and Jeff Bezos’ climate change fund.
Victoria’s Secret Ltd Takeover
Victoria’s Secret, the luxury US lingerie retailer criticised for its lack of diversity and unrealistic supermodel ‘angels’, is going private and being bought by Sycamore Partners in a £407 million deal.
The business posted losses of up to £170m last year, mostly dragged down by onerous leases. Victoria’s Secret 
received a cash injection worth £11m from its owner in October. However, the company had no plans for expansion in the UK.
Leslie Wexner, the tycoon and owner of Victoria’s Secret, is also poised to step down from the parent company L Brands. He bought the lingerie brand for just $1m in the 1980s and led to its rapid rise. He has been in the spotlight because of his ties to Jeffrey Epstein, the disgraced financier, as he used to manage money for him.
L Brands’ market value has collapsed in recent years as it’s main brand has struggled to adjust to changing opinions revolving female beauty. It remains to be seen as to whether Victoria’s Secret performs any better under the ownership of a private equity.
Boeing vs Airbus Tax Break Feud
Boeing and Airbus have been at odds for 16 years with claims of illegal state aid in their operations. Both companies have made complaints regarding tax breaks and Repayable Launch Aid. The complaints have been processing intandem through the WTO.
With Boeing having won, and Airbus likely to win final rounds of their claims, this has resulted in tariffs being imposed by the US on Airbus and potentially vice versa. Given the potential for a tariff war and competition in the industry rapidly rising from China, neither company appears to wish to proceed on this basis. Boeing’s support of the ending of it’s tax breaks from the US is a small step. However, it may be significant in ending a seemingly ceaseless trade war between these two giants of the aviation industry.
Morgan Stanley Make Biggest Deal Since Financial Crash, Buying Online Brokerage for $13 billion
Making the biggest deal on Wall Street since the financial crisis, Morgan Stanley recently acquired E Trade for $13 billion. E Trade has five million clients with assets amounting to $360 billion. These will be added to Morgan Stanley’s $2.7 trillion in assets it manages for three million clients.
This move demonstrates Morgan Stanley’s response to the growing use of Fintech and the reality that people are less essential in such processes as they were previously.
This acquisition follows Morgan Stanley’s approach to reach less affluent customers as opposed to its current approach with 15, 500 human advisors catering to it’s wealthy clientele This also comes to the benefit of E Trade who are therefore able to get ahead of competition, while also causing the cutting of prices from similar online brokerage firms.
Coronavirus Drops Car Sales in China by 92% in February
China is the world’s biggest car market, with sales of over 21 million in 2019. However, due to the recent Coronavirus outbreak, nationwide car sales slumped in February to a daily average of just 811 vehicles.
The impact of Coronavirus has meant production has been severely disrupted for many of the world’s biggest car manufacturers.
In response to this, Geely, a Chinese car manufacturer, has just launched an online service that lets customers buy cars and get home deliveries to avoid the need to go to a dealership.
Car factories are slowing restarting operations, but analysts warn that the supply chain hit may take months to recover. All major carmakers have had production schedules delayed by at least a week. Although plants are restarting, automakers will still struggle to increase output due to the Coronavirus.
Jeff Bezos $10bn Climate Change Fund
Jeff Bezos, the world’s richest man, has started a $10bn (£7.6bn) Bezos Earth Fund in the hope of tackling climate change.
The fund has been welcomed by climate change experts but has raised a few eyebrows from Greenpeace over Amazon’s annual
carbon footprint of 44.4m metric tonnes – the equivalent of the annual emissions of Norway. The Earth Fund could offset Amazon’s carbon footprint.
However, Professor Cameron Hepburn warned that Bezos will need to pick his investments carefully. Here are a few contenders:
- Although we have seen a take up of Electric Vehicles in the past few years, better batteries, range and charging infrastructure are still needed to drive mass adoption.One study estimates that they could save up to 1,700m tonnes of carbon emissions by 2050.
- With $10bn, Bezos could fix energy grids around the world by giving research grants to companies working on so-called “smart grid” technologies”. Using a smart grid in the US could save 442m metric tonnes of carbon emissions per year.
- Bezos likes ambitious projects, and one technology that’s increasingly attractive to climate change experts is ocean thermal energy conversion (OTEC). The technology involves pumping cold water from the depths of oceans and using the temperature difference with warm water heated by the sun on the top of the ocean to generate clean energy. A single offshore OTEC plant could prevent more than 500,000 metric tonnes of carbon emissions per year.
- What is more fitting than Amazon’s founder funding an effort to rebuild the Amazon rainforest as part of a global reforestation project?. Reforestation could remove 205bn metric tonnes of carbon from the planet’s atmosphere. Reforestation schemes could cost up to $1,000 per hectare, which means Bezos could fund 10m hectares of reforested land.
Last Identified FTSE Company with no Female Board Members Plans to go Private
The Hampton-Alexander review recently identified 5 FTSE company yet to appoint a female board member within their company. This comes following the reviews naming and shaming of companies with only one ‘token’ female board member.
Hampton accounts such practices in companies demonstrates their being “out of touch”. He encourages an essential boycotting of such companies by the media, businesses, consumers, and politicians.
One of the companies with no female board members, Daejan Holdings is due to go private through a £1.3 billion deal with its founding family. With shares being sold at £80.50, one sees an increase of 58pc compared to their value on average over the last 6 months. Following the Hampton-Alexander review, Daejan has been left as the only FTSE company without a female board member. Daejan has given its Othorodox Jewish beliefs as an explanation for why such appointments may be ‘problematic’.
This may explain the companies move to go private in order to retain control.
Forever 21 Bought Back from Bankruptcy
Closing down nearly 3,000 stores worldwide in the first 6 months of 2019 alone, Forever 21, has filed for bankruptcy. Having been bought out for £81m by three buyers looking to better brand and market the company, it has been saved from going into liquidation
Forever 21 was one of the first brands to utilise the fast-fashion model of distribution. However, as the company focused on its aggressive expansion campaign, their designs became less and less original – leading to their struggle to keep up with the rising likes of H&M and Zara, who followed a similar model. This, coupled with their failure to keep up with the rise of e-commerce in today’s ever-changing market, Forever 21 failed to compete and fell into bankruptcy.
The new business will be managed by the three buyers: Authentic Brands (brand management company); Simon Property (operates malls); and Brookefield Property (operate commercial properties).
The new campaign will focus on making their surviving stores more relevant to today’s consumers, and the development of new lines of jewellery, footwear and handbags – lots more to come!
Heathrow Runway Illegal on Environmental Grounds
Proposals for an expansion of Heathrow airport with a third runway has been controversial since conception. Whilst it has received support from various businesses, local residents and environmentalists have long since opposed the plans. The Court of Appeal recently ruled the government’s approval of such plans unlawful due to a failure to meet the UK’s climate commitments.
Businesses have commented stating that the UK needs to innovate in order to meet it’s net zero-carbon emissions targets. Arguably, these plans would allow for this. The expansion is predicted to achieve a boost of £61 billion for the wider economy, and 77, 000 local jobs by 2030.
Such economic arguments have been countered vehemently, with environmentalists identifying that Heathrow is the largest emitter of carbon dioxide in Europe. MPs have also identified that an expansion would make 2050 carbon neutral strategies impossible.
Did this post help you gain a better understanding of what commercial awareness topics are relevant? Will you be tuning in next week for the week’s relevant commercial awareness topics, summarised by our outstanding team? Let us know in the comments. Also keep an eye on our blog for more commercial awareness pieces, and pieces on how to excel in your graduate role processes!
