Boohoo acquires Debenhams brand – however all stores to close across the UK

Debenhams

Online fashion retailer Boohoo has today acquired the Debenhams brand and website in a deal worth £55m. However, the firm’s 124 department stores across the UK close.

As a result, more than 12,000 jobs are now at risk.

The administrators of Debenhams UK, FRP Advisory, said: “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.”

Today’s deal followed months of speculation over Debenhams’ future, after retail tycoon Mike Ashley had already made an several offers for the company last year. His £125m offer was rejected in April/May 2020.

However, Debenhams is Boohoo’s latest high street acquisition, following deals for Oasis, Coast and Karen Millen. Much like today’s deal, the terms of the acquisition did not include any of its high street shops.

Boohoo’s Chairman, Mahmud Kamani, said: “This is a transformational deal for the group, which allows us to capture the fantastic opportunity as ecommerce 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 ecommerce, but in new categories including beauty, sport and homeware.”

Debenhams was expected to relaunch on Boohoo’s eCommerce platform in 2022.

Industry reaction

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown shares her views.

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. Showing just how far the once mighty have fallen, boohoo has only had to dip a little into its deep cash pockets to snap up the department store chain’s most precious assets. It’s paying £55 million from its available cash balance which stood at £386.9 million at the end of 2020.

boohoo is turning its back on Debenhams entire store estate, seeing little value in bricks and mortar stores, as the shift to digital shopping intensifies during the pandemic. Instead it believes that the brands and website will help it create the UK’s largest marketplace and position it to propel into international expansion. It sees acquiring the home, beauty and sports assets sold by Debenhams as a big prize, allowing it to enter new markets, and expand from its pure fashion base.

John Colley, Associate Dean of Warwick Business School and an expert on mergers and acquisitions

The Covid pandemic has accelerated trends that have been developing for years. Debenhams is a prime example. It has struggled to offer a convincing rationale to customers for some time, other than perpetual sales and price reductions.

At times the impression has been that directors were more concerned with financial engineering and control than creating a successful business. Of course the trend to online has not helped and Debenhams have suffered with a mixed bag of stores.

With ongoing uncertainty regarding when the High Street might eventually reopen, few will be interested in taking stores and employees, whatever the retail business.

There is no guarantee that Debenhams be a successful online brand as its customer value remains uncertain, other than the low price point.

Boohoo appears to be buying just the brand and website later in the year, leaving the Administrator to sell through the stock on the web to maximise value for the creditors.

We don’t know what Mike Ashley’s offer for Debenhams really was but do know the Administrator has a duty to take what is in his view the best deal for the creditors.

Daniel Whytock, CEO of DownYourHighStreet.com

Consumer choice and jobs will be most severely impacted by these changes. However independent shops will have the opportunity to prosper as consumers look for alternatives to the household names that have been acquired and taken online.

I predict that within five years we will see High Streets offering a more unique experience. Independent retailers will thrive as they are small enough to adapt quickly to changes, and with these large brands leaving the High Street, smaller retailer will be the ones offering consumers a place to shop in person – where they can talk to someone, feel and see the goods they want to purchase, and know that returns can be processed quickly and easily if needed.

Also, shopping is, for many, a social activity. So once the restrictions are lifted many people will be looking for that in-person experience to complement their online shopping.

The Debenhams department store was founded in the 1700’s, one of the first ever to exist, so this is a very sad loss for the High Street. A department store, by definition, offers a variety of consumer goods in different areas of the store; each department focused on a different category. This is very much like an e-commerce store, although e-commerce offers you everything you need within a few seconds without the need to walk around. Debenhams becoming part of an online marketplace is somewhat inevitable.

Even with the rise of e-commerce, consumers wanting their shopping the very next day and at the best price, let’s not forget that human beings naturally desire physical experiences and the retailers that offer the best experience will prosper on the high street in years to come.

Russell Pointon, Director Consumer & Media at Edison Group

The protracted sale of Debenhams is partly resolved now with Boohoo acquiring the department store’s brand and website for £55m – the latest in a string of purchases by the online giant of distressed traditional retail brands. Crucially, this move will allow Boohoo to increase their exposure to sectors they are currently not known for – including beauty, a category that has transitioned to online relatively slowly, and homeware, making the category product offer more similar to that of Next.”

Co-founder and executive chairman of Boohoo Mahmud Kamani wants to relaunch Debenhams, once a stalwart of physical retail, as an entirely digital platform – serving as a clear and pertinent reminder of our accelerated shift to online retail. Less obvious are the finer details of how the integration of Debenhams into Boohoo will work once live in Boohoo’s marketplace from early next year – specifically how much of Debenhams’ online sales will come across to Boohoo and how autonomous the brand will be in the context of its new online marketplace. Also yet to be resolved is the fate of Debenhams’ remaining retail stores, stock and financial services operations, which are not part of this transaction.

Matt Bird, Founder of The Shirt Society

The latest news that Boohoo are to take over Debenhams online presence, but not its stores, is another body blow for the British high street. It is clear that retailers need to move with the times to ensure continued survival in bricks and mortar.

One thing that fashion retailers should consider is bringing technology into stores. A survey conducted by The Shirt Society as lockdown lifted in the UK revealed that 56% of those asked intended not to shop in-store at all, spurred on by positive experiences of online purchasing during lockdown. Instead of rebelling against this, retailers should see the introduction of new technology as an opportunity.

Moreover, consumers are increasingly demanding a strong brand identity, and impressive sustainability credentials, from the retailers they choose. Generation Z are particularly engaged with sustainability, and with this group entering the workforce this year, expect retail businesses to be clamouring to demonstrate that this is a key part of their identity.

The future of the retail landscape looks to be enriched by fully rounded brands and innovative practices that show a commitment to making the industry more sustainable. The Debenhams takeover only serves to highlight the importance of this, or risk losing more High Street shops to come.

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