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.
Subscribe to 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”.
-
Watch out for fake Steven Bartlett video – you could lose thousandsScammers are trying to tap into the Trump tariffs chaos, but knowing what to look out for could save you thousands of pounds, says Kalpana Fitzpatrick
-
Can Donald Trump fire Jay Powell – and what do his threats mean for investors?Donald Trump has been vocal in his criticism of Jerome "Jay" Powell, chairman of the Federal Reserve. What do his threats to fire him mean for markets and investors?
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocksOpinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
Tesco braces for supermarket price war with rival AsdaTesco, Britain’s biggest grocer, has opted to cut its prices more quickly to prevent Asda grabbing market share
-
BP's 'long, painful decline' – and why next year could be even tougherOpinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global marketsOpinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
Can a rebrand save WH Smith?Opinion WH Smith's high-street shops have had their day and a change of owner is unlikely to turn things around, says Matthew Lynn
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
-
Greggs’ enduring recipe for success on the high streetGreggs grew from a shop founded in Newcastle after the war into a national treasure. Profits will continue to roll in for patient investors, says Jamie Ward
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
