Boohoo buys Debenhams for £55m, marks big move into beauty, home
Boohoo Group on Monday confirmed that it has bought the Debenhams brand for £55 million plus VAT. It will use it to move into beauty and homewares, extend its own brand offering and operate a giant online marketplace.
The deal doesn’t include any Debenhams' retail stores, stock or any financial services, which means thousands of jobs should be lost. The stores are currently closed due to the lockdown but some could reopen to continue their clearance sales once they’re allowed to.
The former department store chain may have struggled for years, but its appeal to Boohoo is clear with the company saying on Monday: “Debenhams is a long-standing and leading UK fashion and beauty retailer with high brand awareness, and an established online platform with approximately 300 million UK website visits per annum. This makes it a top 10 retail website in the UK by traffic.”
It called the purchase “a fantastic opportunity to grow the group's target addressable market and increase the share of wallet opportunity through a new capital-light and low-risk operating model that is complementary to the group's highly successful direct-to-consumer multi-brand platform”.
It now plans to “rebuild and relaunch the Debenhams platform, helping further the group's stated ambition to lead the fashion e-commerce market, and grow into new categories including beauty, sport and homeware”.
Its aim is to run the UK's largest marketplace across those three categories plus fashion (of course). It will “expand the range of products sold via the Debenhams marketplace by maintaining existing marketplace brand relationships and adding new brands over time”.
The relaunched marketplace will also provide “an exciting new route to market for the group's existing brand portfolio”, which includes the Boohoo brand plus PrettyLittleThing, Nasty Gal, Miss Pap, Karen Millen, Warehouse and Oasis.
Debenhams’ own-brand fashion labels — such as Maine, Mantaray, Principles and Faith — will “absorbed into Boohoo's current brand portfolio and sold via the core Debenhams site and their own pureplay websites”. It didn’t mention the Designers at Debenhams portfolio though.
In beauty, it will continue to operate the current wholesale model, “but will also look to add new beauty brands via the marketplace model”.
Boohoo CEO John Lyttle said the buy is “an important development for the group, as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail”.
And Executive Chairman Mahmud Kamani went further by calling the deal a “transformational” one for his business. He said it “accelerates our ambition to be a leader, not just in fashion e-commerce, but in new categories”.
The purchase is something of a surprise though as House of Fraser owner Frasers Group had been keen to buy the business and at one point had been seen not just as the frontrunner but the only one in the race.
The move into new categories for Boohoo really is key and gives it instant exposure to them on a scale that would have taken some time for it to build up from scratch. Debenhams is one of the UK's leading prestige beauty retailers across make-up, skincare and fragrance with 6 million beauty shoppers and 1.4 million Beauty Club members.
Importantly, that also gives Boohoo the opportunity “to leverage Debenhams' customer database.
And rather than it being a mainly-UK business, the purchase will help “develop the platform for international markets in the future”.
In Debenhams' most recent financial year (to 31 August 2020), the online business generated unaudited online net revenues of around £400 million. The marketplace accounted for 25% of that, beauty for 20%, own brand fashion for 25% and wholesale inventory for 30%. That stock, bought from third-party brands, included fashion, sport and homewares and “will not continue to operate under the group's ownership”.
So what happens now? Debenhams is expected to relaunch on the Boohoo platform in Q1 FY22. Boohoo said that “in order to allow for the winding down of Debenhams' operations, Debenhams will continue to operate its website for an agreed period before the relaunch on the group's platform and a licence has been granted to allow for the winding down of Debenhams' retail stores (when they are in a position to reopen) for an additional period”.
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