As anticipated, online fast fashion retailer Boohoo (BOO:AIM) is acquiring the online assets including customer data of the Burton, Dorothy Perkins and Wallis brands from the administrators of the collapsed Arcadia for £25.2 million in cash.

Manchester-headquartered Boohoo believes the deal will extend its market share across a broader demographic and enable it to capitalise on growth opportunities as more and more customers shop online.

However, shares in Boohoo were marked down 3.7% to 351.2p on talk that chancellor Rishi Sunak wants to impose an extra tax on companies which have prospered during the pandemic, with fellow retailers ASOS (ASC:AIM), Dunelm (DNLM) and AO World (AO.) also weaker on Monday.

BRINGING BRANDS ON BOARD

Hot on the heels of buying Debenhams’ online business for £55 million late last month, Boohoo is reaching into its wallet once again to add the Dorothy Perkins, Wallis and Burton brand names to the stable of 15 brands it now operates.

‘Acquiring these well-known brands in British fashion out of administration ensures their heritage is sustained,’ explained Boohoo chief executive John Lyttle, ‘while our investment aims to transform them into brands that are fit for the current market environment. We have a successful track record of integrating British heritage fashion brands onto our proven multi-brand platform, and we are looking forward to bringing these brands on board.’

Though the acquisition of Dorothy Perkins, Wallis and Burton is unlikely to turbocharge growth, these brands are familiar names to UK shoppers and Boohoo clearly sees an opportunity to squeeze some value out of them.

THE EXPERTS’ VIEW

Russ Mould, investment director at AJ Bell, commented: ‘Boohoo now has a lot of work on its plate in sorting out the strategic direction for its plethora of newly-acquired brands. At the same it is still trying to improve standards across its existing business which means management will have to be good at multitasking or chaos will ensue.’

Jefferies sees this deal as ‘a very good one for boohoo - absolutely consistent with the strategy of adding brands to its multi-brand platform, a transaction type in which the group has a demonstrable track record, and a very reasonable price for some substantial, scaled assets.’

However Shore Capital, which has a ‘sell’ rating on Boohoo, commented: ‘We understand that Dorothy Perkins may have some brand equity but struggle with the rationale of Wallis, although the administrators of the Arcadia stable needed to find a new home for all the brands.

‘Boohoo continues to scale up, but we question the band width of the existing management team and potential execution risk continues to rise with every acquisition.’

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Issue Date: 08 Feb 2021