Boohoo, an online fast-fashion retailer, today announced (pdf) it is buying Debenhams, a UK department store, in a £55 million ($75 million) cash deal. Boohoo will get Debenhams’ brands and any associated intellectual property. It will also allow Debenhams, which since 2020 has been in administration—a rough British equivalent of bankruptcy—to continue running its website until Boohoo can relaunch it. Not included in the purchase are Debenhams’ 118 stores, which are to permanently close.
It isn’t the only company on the hunt. Asos, another UK-based online fashion retailer, has emerged as the frontrunner to buy Topshop, Topman, and other brands being offered for sale by Philip Green’s Arcadia Group. In November, the group entered administration after the pandemic put pressure on a foundation that started to crack long before. Similar to Boohoo, Asos only wants the brands and not the stores, according to the BBC.
The moves underscore the steady shift of shoppers toward online retail, as well as the uneven suffering the pandemic has inflicted on companies, even within the same industry. Debenhams dates back to 1778, when it opened as a London shop selling pricey fabrics and items such as parasols. It steadily expanded, and by 1950, the company website boasts, it had grown into the largest department store group in the UK. But over the last decade or so, it lost relevance as it failed to keep up with trends and to adapt to the rise of online shopping. Meanwhile, companies such as Asos, launched in 2000, and Boohoo, founded in 2006, have grown into powerful forces in online fashion retail by being able to design, produce, and get trendy clothes onto their digital storefronts faster than the competition.
The pandemic only exacerbated these divides. In 2020, sales at UK clothing stores plunged 25%. But during the year, online retailers including Boohoo and Asos saw sales grow as home-bound shoppers headed to their websites to buy products such as activewear and loungewear. In the 10 months through Dec. 31, Boohoo said its UK sales rose 38% (pdf) versus the same period last year, while Asos saw a 36% increase in UK sales (pdf) in the four-month period ended on the same date.
Experts predicted the gap between winners and losers in fashion would create the conditions for widespread consolidation in the industry in 2021, as companies with strong balance sheets look to expand by scooping up retailers in distress. Boohoo is taking its shot. It says Debenhams website already receives about 300 million visits in the UK annually, and in addition to its substantial business in fashion, the company has a foothold in categories such as beauty, sports, and homewares. Boohoo intends to rebuild and relaunch the Debenhams website and create what it says will be “the UK’s largest marketplace” for all these products.
It could be the first of many such moves this year, including others possibly by Boohoo. On a call with investors and analysts to discuss the Debenhams deal, Boohoo CEO John Lyttle pointed out the cash for the purchase is coming from its existing reserves, which totaled about £387 million at the end of 2020, “leaving a significant remaining cash balance to support further M&A opportunities as they arise,” he said.