2,450 jobs set to be lost following acquisitions by Boohoo

Covid-19 News | Employment & Skills | Latest News | Mergers & Acquisitions | Retail

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Online fashion retailer Boohoo has this week announced the acquisitions of Dorothy Perkins, Wallis and Burton brands from Sir Philip Green’s retail empire, Arcadia Group, for £25.2m.

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However, the deal includes the brands and online businesses – but not the 214 retail stores, or the 2,450 employees within them. Administrators Deloitte have announced that these jobs will likely be lost as a result.

Arcadia fell into administration in November, and the move follows Boohoo’s main competitor Asos buying Arcadia’s other leading brands, includingTopshop, Topman, and Miss Selfridge.

A statement from Boohoo read: “Acquiring these well-known brands in British fashion out of administration ensures their heritage is sustained, 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.”

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Industry reaction

Rob van den Heuvel, CEO at Sendcloud said: “Today’s news of Boohoo acquiring Dorothy Perkins and Burtons, the final sale and piece of the puzzle of the Arcadia Group, serves as a warning towards businesses that have not yet embraced e-commerce.

“Although the pandemic played a big part in driving the nail through Arcadia Group’s coffin, it is the sad conclusion of businesses that failed to embrace the future of retail as offline sales steadily decreased and physical stores were eventually deemed not part of Boohoo’s long-term strategy.

“Asos’ recent purchase of the Topshop group of stores is part of the business’ strategy to “accelerate our multi-brand platform strategy” – although they too chose not to take on the bricks and mortar stores. But these shouldn’t be used as more ‘death of the highstreet’ stories.

“Zoom fatigue and cabin fever have set in. Consumers are craving the face-to-face retail experience now more than ever, with 44% of consumers planning to start shopping at retail stores as soon as businesses reopen.

“While shifting to e-commerce may be one of the only ways businesses survive in the short-term – now is not the time to tear down brick and mortar stores.

“There’s no doubting the sudden surge of socially-distanced footfall on UK highstreets as more and more people demand the physical experience that the ‘old fashioned’ way of shopping brings.

“Those retailers that will not just survive, but thrive in the long-term will be those that can offer consumers a variety of different experiences – embracing a model built on the quality of the physical experience underpinned by the speed and efficiency of buying online.”

Professor John Colley, Associate Dean of Warwick Business School and an expert in mergers and acquisitions, said: “Boohoo, much like Asos, knows a good deal when it sees one. Both have taken advantage of the turmoil on the High Street to add well-known brands to their business empires.

“At the very least, they should be able to pick up long term fans of those brands. However, they may have to invest heavily to reinvigorate these brands from the past to make them appeal to a new audience so they have a sustainable future.

“The purchase price was low, allowing them to acquire the stock at a fraction of the cost and close the poor performing stores. This helps to minimise the risk attached to their investment if the websites fail to pull in enough buyers.

“But the fact that these online retailers are only interested in the brands, not the stores themselves, is bad news for the High Street. It means hundreds of shops will close and many thousands of staff will be made redundant. Those workers will probably have to change occupation as the High Street continues to shrink, leaving little in the way for job opportunities.

“Meanwhile landlords will have to try to re-let the properties and there will be few takers in the current climate. With retail values collapsing, it is likely that many of these properties have to be converted for other uses. In that sense, we can see Covid-19 accelerating and crystallising trends which have been developing for many years.”

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown said: “Fresh from its shopping spree, snapping up the Debenhams brand and website, boohoo is rifling through the bargain bins once more, this time at Arcadia. It’s entered into exclusive discussions to acquire the Dorothy Perkins, Wallis and Burton brands.

“ASOS had turned its nose up at the trio of brands, only entering into exclusive talks to buy TopShop, TopMan, Miss Selfridge and the fitness brand HITT. It clearly feels those brands would most appeal to its young fashion base.

“But boohoo, a super-fast growing e-retailer which first began as a market stall, clearly believes there is still demand to be squeezed out of the Dorothy Perkins, Wallis and Burton businesses, which have been on the high street for around a century. Dorothy Perkins began life as Ladies Hosiery and Underwear limited and expanded during the 1920s. If it is snapped up it could herald another roaring twenties renaissance for ‘Dotty Ps’ in the digital age.

“As an online only fashion giant, boohoo would be only interested in the brands, seeing little value in the store estate as the shift to digital sales intensifies. It has deep cash pockets which it can dip into as part of its plan to create the UK’s largest retail marketplace and propel its international expansion. So the rescue of the famous names, wouldn’t throw a lifeline to the thousands of shop workers who are very likely to still face redundancy.”

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