Online fashion retailer Boohoo is set to acquire the online businesses of competitors Oasis and Warehouse for £5.25m.
Oasis and Warehouse are a part of the same retail group, which collapsed into administration in April with the loss of 1,800 jobs, the closure of 90 stores and over 400 concessions in Debenhams and Selfridges.
The brand and stock were bought by Hilco Capital as part of that arrangement.
First quarter revenues for Boohoo rose 45% to £367.8m, excluding the impact of exchange rates. That reflects strong growth across all geographies, especially the US.
The group now expects full-year revenue growth of around 25%, better than current market expectations.
Alongside the trading statement boohoo announced the acquisition of the online businesses, and all associated intellectual property, of Oasis and Warehouse for £5.25m.
The shares rose 9.3% following the announcement.
John Colley, Associate Dean of Warwick Business School, said: “Oasis and Warehouse are relatively weakly differentiated brands which have been struggling well before the Covid pandemic.
“Boohoo is picking up brands and remaining stock to sell online from the Administrator at negligible cost. It seems unlikely that Boohoo will invest in these brands and so it is probably to make money from selling end stock at a profit. If there should be reasonable demand then perhaps the brands will persist.”
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown said: “boohoo has snapped up the online businesses of Warehouse and Oasis. These names were loved on the high street of yesteryear but had run into trouble more recently. It’s up to boohoo to rejuvenate them and hope they resonate well with its traditionally younger, more fashion forward customer base. It’s a similar move to the Karen Millen and Coast acquisitions, but while we’ve heard trading’s going well with these additions, we haven’t had any numbers to crunch, so it’s hard to say what the big picture looks like.
“Acquisitions are an important tool in boohoo’s armoury, because the share price valuation demands exponential growth, and there’s only so much fuel left in the tank of the flagship brand. What will be interesting is how many further buying opportunities are kicked up by coronavirus. We can expect a handful of struggling retailers to fold in the coming months, and boohoo’s cash-laden balance sheet means it will be able to pounce. Gearing up for future growth doesn’t come cheap though, and capital expenditure is expected to spike in the current financial year. That’s all well and good so long as sales growth follows suit – if it doesn’t then the added scale becomes a drag, rather than a benefit, for profits.
“To the group’s credit, it has an incredibly supple supply and manufacturing process, which allowed it to pivot its offerings quickly when lockdown came around, with higher demand for things like loungewear being the order of the day. That modus operandi holds the group in good stead and helped protect margins during the disruption. Overall, boohoo has a stellar business model and its progress shouldn’t be knocked, but it’s spinning an increasing number of plates these days, and there’s a lot riding on a near-perfect execution of its ambitious plans.”