Boohoo, Asos seek to rescue failed UK stores Debenhams and Topshop online

Asos said the deal would be funded from its cash reserves.
Asos said the deal would be funded from its cash reserves.PHOTOS: AFP

LONDON(BLOOMBERG) - Online fashion retailers Boohoo Group and Asos are seeking to rescue ailing UK retail brands like Debenhams and Topshop.

Boohoo said on Monday (Jan 25) it’s buying the Debenhams brand for £55 million ($100 million). Separately, Asos said it’s in exclusive talks with administrators of Philip Green’s Arcadia Group to buy the UK retailer’s Topshop brand and other labels.

Boohoo said it will acquire the Debenhams brands and its fashion sub-brands, including Manta Ray and Principles. The modest purchase price reflects the fact that Boohoo is not buying any of the retailer’s stock or keeping its 124 stores which, when the current UK lockdown ends, will only reopen long enough to sell remaining merchandise before closing again. Their permanent closure threatens thousands of jobs.

Boohoo’s last-minute swoop reflects the fast-growing online retailer’s desire to expand its offerings online beyond its main customer base of teenage and young twenty-something women. Debenhams also has a substantial beauty business online.

Debenhams is one of Britain’s best-known retail brands, which traces its history back more than 240 years but has struggled recently, weighed down by hefty rents and large property taxes of its stores. The retailer also faces the challenge of fierce competition from e-commerce in the UK as consumers increasingly shifting from shopping in stores to buying online. The trend has accelerated during the pandemic.

The deal also comes after Mike Ashley’s Frasers Group failed to carry out a deal to buy the Debenhams brand, its website and some of the chain’s 124 stores. Earlier talks with JD Sports Fashion to buy Debenhams for £300 million also collapsed after the failure of Arcadia Group, whose brands Topshop and Dorothy Perkins have a dominant presence in Debenham’s stores.

Debenhams entered administration, a UK form of insolvency, in December and is currently in the process of being liquidated.

Asos confirmed the talks for the Arcadia brands after Sky News reported that it’s the frontrunner to buy Topshop from the insolvent company, which collapsed as coronavirus-related lockdowns compounded its woes. A price of more than £250 million is being discussed, according to the report.

The talks also include the Topman, Miss Selfridge and HIIT brands, according to a statement. Any transaction would not include the Arcadia units’ stores, Sky reported.

Fashion retailer Next and a range of other potential acquirers were previously reported to be interested in Topshop.

Any deal would be funded in cash, Asos said. There’s no certainty of a transaction, it added.