The 15-year-old online fashion retailer has bought the Debenhams brand and website for £55 million
The coronavirus pandemic continues to affect businesses all over the UK, and big retail brands have not been spared from the effects of lockdown on the high street. Boohoo has now acquired retail giant Debenhams in a £55 million deal that will result in the department store disappearing from the high street.
The 243-year-old department store chain is now being taken over by a 15-year-old online start-up, and will now disappear from British high streets for good while leaving more than 12,000 jobs at risk. This comes after administrators failed to secure a rescue deal for the business. The administrators of Debenhams UK, FRP Advisory, said they had undertaken a “thorough and robust process” to achieve “the best outcome for Debenhams’ stakeholders”. “This transaction will allow a new Debenhams-branded business to emerge under strong new ownership, including an online operation and the opportunity to secure an international franchise network that will operate under licence using the Debenhams name,” they added.
Debenhams made approximately £400 million in online revenues in its most recent financial year to 31 August 2020, and Boohoo said Debenhams’ website receives 300 million visits a year, making it a top 10 retail website in the UK by traffic. John Lyttle, the Boohoo chief executive, said the company was still working through the numbers on how many jobs might be saved but that there were no definitive numbers at this point, with some jobs in beauty expected to be saved. Initially, we want to get the [Debenhams] marketplace launched in the spring to early summer, Lyttle said in a call with analysts. Across the group, just under half of our revenues are made internationally, so there is an opportunity to launch the marketplace in international markets over time. Susannah Streeter, the senior investment and markets analyst at Hargreaves Lansdown, said the acquisition marked a significant moment for Boohoo and for retail. Boohoo aims to break into the retail big time with this deal. It marks quite a journey for the company, which started as a fast-fashion upstart and is now turning into a sprawling empire, by scooping up household names which have fallen into distress, she said.
Boohoo has already bought several High Street brands out of administration during the pandemic, including Oasis, Coast and Karen Millen, but not their high street stores. The group said this was a transformational deal and a fantastic opportunity for their empire to grow. This is a transformational deal for the group, which allows us to capture the fantastic opportunity as e-commerce continues to grow. Our ambition is to create the UK’s largest marketplace, said Mahmud Kamani, the executive chairman at Boohoo. Our 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 e-commerce but in new categories including beauty, sport and homeware.
In the meantime, Debenhams will continue to operate its website for an agreed period. Boohoo has come under scrutiny for workers’ pay and condition with its low pricing with a fast response to changing fashion trends and its appeal to a younger consumer base. Investigations last year suggested workers were being paid below the minimum wage, as well as accusations of widespread abuse of employment law at some of Boohoo’s suppliers in Leicester. The deal comes after Mike Ashley’s Frasers group, owner of Sports Direct, was in talks to buy Debenhams for weeks but failed to gain control of the department store before it fell into administration in 2019.