Shares in Boohoo (BOO:AIM) bounced 4.3% higher to 347p on Monday after the web-based fast fashion retailer acquired collapsed department store Debenhams’ online assets for £55 million in a deal that enlarges Boohoo’s target addressable market.
Debenhams’ online business is a top 10 retail website in the UK by traffic, enjoying roughly 300 million UK visits per year, though unsurprisingly, Christmas winner Boohoo will not be buying any of the department stores or stock as part of the deal, though it will be buying Debenhams’ own fashion brands.
SAVVY STRATEGIC MOVE?
On the day arch-rival ASOS (ASC:AIM) confirmed it is in exclusive talks with the administrators of Arcadia over the acquisition of the Topshop, Topman, Miss Selfridge and HIIT brands, Boohoo has bought all the intellectual property assets, including customer data and selected contacts, of Debenhams Retail from the joint administrators for £55 million in cash.
Shore Capital said this strategic acquisition allows the deal-hungry Boohoo-to-PrettyLittleThing brands owner, blessed with the best part of £390 million cash in the coffers at the end of 2020, to ‘grow its target addressable market’.
This latest bolt-on acquisition also takes Boohoo into a new vertical market in beauty, which should resonate with the retailer’s core customer.
‘In recent years we have seen the Boohoo group move into an older age demographic with the acquisition of the brand rights and IP of Karen Millen, Coast, Warehouse and Oasis,’ explained the broker.
REBUILD & RELAUNCH
Manchester-based Boohoo plans to rebuild and relaunch the Debenhams platform and beyond beauty, the acquisition allows the group to enter the sport and homewares markets.
Boohoo’s executive chairman Mahmud Kamani believes 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. 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 our view, this is a sensible bolt-on acquisition which helps scale the Boohoo group,’ added Shore Capital, though the broker remains a seller of Boohoo on fundamentals, flagging ‘the ongoing corporate governance issues and sourcing fallout from Leicester as the costs of business are set to increase rise with freight costs rising.’