Boohoo confirmed on Monday that it would buy the online operation of Debenhams while rival Asos said it was in exclusive talks with the administrators of Arcadia, as the coronavirus pandemic accelerates a fundamental reordering of the UK retail industry.
The Manchester-based online fashion retailer, which was only founded in 2006, will pay £55m for the intellectual property of the 243-year-old department store chain, which went into administration in April last year.
John Lyttle, the former Primark executive recruited by Boohoo to oversee its expansion into a retailer of genuine scale, said: “The acquisition of the Debenhams brand is an important development for the group, as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail.”
Asos said in a short statement that it was in exclusive discussions with the administrators of Arcadia, the retail empire assembled by tycoon Philip Green, over the acquisition of some of its brands including the key Topshop and Topman franchises.
Arcadia was among the most important players in fashion during the early 2000s, a time when Sir Philip was fond of downplaying the emergence of pure-play online retailers. But it collapsed into administration in November last year after its relatively weak online operation was unable to offset the impact of store closures during the pandemic.
“The board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its customer base,” Asos said, while cautioning there was “no certainty” of a transaction.
Shares in both Boohoo and Asos rose 3.6 per cent in morning trading in London.
Boohoo and Asos have prospered during the Covid-19 pandemic, picking up market share from store-based rivals that were forced to close during the UK’s repeated lockdowns.
Their shorter and more agile supply chains were also able to pivot more quickly away from formalwear and going-out attire to the “lockdown chic” style of hoodies, joggers and leggings.
Investor enthusiasm meant both were able to raise fresh equity last year, putting them in a stronger position to make acquisitions. But core parts of Arcadia and Debenhams are not being purchased, putting the majority of the 20,000 jobs at both retailers at risk.
Neither Asos nor Boohoo want to operate stores, meaning that Debenhams’ remaining 118 department stores and more than 400 sites occupied by Arcadia look set to close for good, creating more gaps in British town centres already grappling with rising vacancy rates.
Boohoo is also not acquiring any of Debenhams’ inventory or its financial services operations; customer credit there and at Asos is provided through third-party “buy now pay later” providers such as Klarna, rather than traditional storecards and credit cards.
The deal is expected to help expand Boohoo’s reach beyond youth fashion. Boohoo said it intended to “rebuild and relaunch the Debenhams platform” and create “the UK’s largest marketplace across fashion, beauty, sport and homeware”.
Mahmud Kamani, Boohoo’s co-founder and executive chairman, said it “represents a huge step which accelerates our ambition to be a leader, not just in fashion ecommerce, but in new categories”.