NEWS

Boohoo acquires Debenhams’ online business for £55m

Published on: 26th January 2021

The move will mean that all Debenhams’ remaining physical stores will close, and 12,000 staff will lose their jobs. 

The online fashion retailer Boohoo has purchased Debenhams’ online business for around £55m, meaning the department store chain’s remaining 118 brick & mortar stores will now close. As a result, some 12,000 jobs will be lost.

Debenhams has been in administration since April 2019, and liquidated in December 2020 after Philip Green’s JD Sports pulled out of talks when Arcadia Group also went under. At the time, Debenhams had 124 UK stores to its name.

Boohoo, which is also buying the brands Maine, Mantaray, Principles and Faith, said Debenhams’ remaining stores will be wound down after the high street lockdown ends and they can reopen to sell off stock.

“This is a transformational deal for the group, which allows us to capture the fantastic opportunity as eCommerce continues to grow. Our ambition is to create the UK’s largest marketplace,” said Mahmud Kamani, executive chairman at Boohoo. “The acquisition of the Debenhams brand is strategically significant as it represents a huge step which accelerates our ambition to be a leader, not just in fashion eCommerce, but in new categories including beauty, sport and homeware.”

Boohoo has previously bought a number of well-known high street fashion brands out of administration, turning them into online-only operations.

Analysts say the acquisition of Debenhams’ website will help Boohoo appeal to older shoppers and give it access to new markets. Boohoo hopes to use its existing systems to take Debenhams brands such as Principles, Maine and Mantaray overseas, and improve their distribution in the UK. The company’s plans to set itself up as a marketplace will use Debenhams’ existing relationships to sell third-party brands for the first time.

It has also been noted that Boohoo also has adequate resources to broker additional similar deals; the company says it has £387m of cash left to fund further acquisitions and expects the impact of coronavirus on the high street to produce more targets.

Timothy Armoo, CEO of Fanbytes, has prevously raised investment from the Kamani family behind Boohoo and is familiar with the workings of the company. He described the deal as “a pretty big shift in the fast fashion industry, as it moves Boohoo from being purely a fashion retailer to being a technology play.”  As Debenhams operates on a marketplace model, where 3rd party retailers sell on the site, he suggests, Boohoo may choose to not own the stock but take a fee for each transaction, in what would prove to be a “high margin and scalable business – similar to how Amazon and eBay operate”. With a large and established customer base, Boohoo could also offer its own brands through the marketplace, then third party brands, then potentially advertising tools for those brands.

“In the same way that Amazon has dominated online commerce in general, we may be seeing the birth of the most dominant fast-fashion marketplace in Boohoo,” Timo added.

Retail trade union Usdaw said it was is seeking urgent meetings with Debenhams’ administrators and called on the government to do more to save high streets. Dave Gill, Usdaw national officer, said: “It is devastating news for our high streets that Debenhams’ administrators have sold the company brand to an online only retailer. Throughout Debenhams’ difficulties, the company and then administrators have refused to engage with Usdaw; the staff are being treated appallingly.”

An investigation into modern day slavery at Boohoo, which alleges workers in Leicester making clothes linked to the company were found to have been paid as little as £3.50 an hour, according to an undercover report, is ongoing, raising further concerns about the deal.

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