There’s “another garage sale happening in UK retail”, says Andrea Felsted on Bloomberg. However, instead of traditional retail tycoons such as Mike Ashley, the buyers are the “online upstarts they tried for years to resist”. Online fashion store Boohoo Group is to buy the brand and website of struggling department store Debenhams for £55m. Meanwhile, its rival ASOS is in “exclusive talks” to acquire Topshop, Topman and Miss Selfridge, currently owned by Arcadia, for up to £300m. Both Boohoo and ASOS are only interested in the digital assets, such as the brand name and the websites. That implies yet “more store closures on... high streets”.
The fact that neither ASOS nor Boohoo want the “messy expensive stuff” such as stores or staff shows how the deal is a “changing of the guard”, says Ben Chapman in The Independent. Power is moving “from the analogue retail world to the digital”. While the proportion of sales carried out online has been rising for years, the pandemic has turned this into a “looming problem”, with retailers across the country forced to pay with “billions of pounds” in rent and bills for stores that were forced to shut. Meanwhile, their online-only rivals “have enjoyed a sales boost without the dead weight of stores with no customers”.
Poor management
It’s true that Covid-19 “has revved up shopping’s shift online”, which means that “weak, or hollowed-out” high-street brands “are keeling over at a terrific clip”, says Alistair Osborne in The Times. Still, Debenhams’ past and present owners deserve a lot of blame for the fact that Boohoo was able to snap up the store, once valued at £1.7bn, for just £55m – this is especially the case with the private-equity group that “extracted more than £1bn” through a “preposterous 35-year sale and leaseback on the stores” before floating the debt-laden firm in 2006. That all but guaranteed that it “bombed from day one” as a public company.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The idea of buying Debenhams in order to relaunch it as an online-only brand isn’t without risk, says Jonathan Eley in the Financial Times, especially given the failure of earlier attempts by other firms to reinvent other previously popular brands such as BHS and Woolworths. However, the strategy will help Boohoo expand into new categories “such as beauty, sportswear and homewares” and bring Debenhams’s “established fashion brands” on board. It will also increase Boohoo’s audience: Debenhams “is one of the top-ten retail websites in the UK, with 300 million visits and £400m of sales in the year to August 2020”.
And this isn’t the first high-street brand that Boohoo has bought up, says Sarah Butler in The Guardian. Last year it acquired Oasis, Warehouse, Karen Millen and Coast. Despite this spree, record profits, fuelled by a 40% jump in sales in the run-up to Christmas, mean that it has “plenty of money” to pull off similar deals. With many other high-street retailers in dire trouble, you can expect it to find “many more targets”.
-
Leading European companies offer long-term growthOpinion Alexander Darwall, lead portfolio manager, European Opportunities Trust, picks three European companies where he'd put his money
-
How to harness the power of dividendsDividends went out of style in the pandemic. It’s great to see them back, says Rupert Hargreaves
-
Leading European companies offer long-term growth prospects
Opinion Alexander Darwall, lead portfolio manager, European Opportunities Trust, picks three European companies where he'd put his money
-
How to harness the power of dividends
Dividends went out of style in the pandemic. It’s great to see them back, says Rupert Hargreaves
-
Why Trustpilot is a stock to watch for exposure to the e-commerce marketTrustpilot has built a defensible position in one of the most critical areas of the internet: the infrastructure of trust, says Jamie Ward
-
Tetragon Financial: An exotic investment trust producing stellar returnsTetragon Financial has performed very well, but it won't appeal to most investors – there are clear reasons for the huge discount, says Rupert Hargreaves
-
How to capitalise on the pessimism around Britain's stock marketOpinion There was little in the Budget to prop up Britain's stock market, but opportunities are hiding in plain sight. Investors should take advantage while they can
-
London claims victory in the Brexit warsOpinion JPMorgan Chase's decision to build a new headquarters in London is a huge vote of confidence and a sign that the City will remain Europe's key financial hub
-
Reinventing the high street – how to invest in the retailers driving the changeThe high street brands that can make shopping and leisure an enjoyable experience will thrive, says Maryam Cockar
-
The consequences of the Autumn Budget – and what it means for the UK economyOpinion A directionless and floundering government has ducked the hard choices at the Autumn Budget, says Simon Wilson
