More than 20,000 high street jobs are at risk after the online retailer Boohoo bought the Debenhams brand and its rival Asos said it was poised to buy Topshop.
Debenhams, which traces its roots back to 1778, will disappear from the high street with the likely loss of up to 12,000 jobs after the £55m Boohoo deal, which does not include the department store chain’s high street operation. As part of the deal, Boohoo will buy the retailer’s Maine, Mantaray, Principles and Faith labels, while Debenhams’ remaining 124 stores will be permanently closed once they are allowed to reopen in order to sell off stock.
The online fashion retailer Asos is, meanwhile, in exclusive talks to buy Topshop, Topman, Miss Selfridge and the athleisure label HIIT from Arcadia, Sir Phillip Green’s former retail empire, which collapsed into administration last year and employs 13,000 people.
If Asos finalises a deal for Arcadia’s leading brands it is likely to be bad news for thousands of staff at the relevant stores, which are not expected to be taken on by the online specialist. Arcadia Group – which also owns Dorothy Perkins, Wallis and Burton – had 500 stores across the UK when it entered administration in November. So far only the group’s plus-size retail chain, Evans, has been sold off. After the £23m deal with the Australian retailer City Chic Collective, all Evans shops and concessions will shut as the brand becomes an online-only business.
While Arcadia and Debenhams have been struggling for some time, the two deals highlight the disparate fortunes of the online specialists and their ageing rivals reliant on physical stores, which have been forced to close for months during the coronavirus pandemic.
Richard Hyman, a retail analyst and partner at the consultancy TPC, said Covid-19 had only accelerated an existing trend: “Twenty years ago there was no such thing as online retailing. Non-food retail sales online hit £90bn in 2020. [Since 2000] the number of physical stores have not gone down and something has got to give.
“It is terrible for the people that work there but there is going to have to be a lot of repurposing as UK retail is oversupplied.”
According to the Centre for Retail Research, the UK high street shed 177,000 jobs in 2020, and a further 200,000 are expected to be lost this year.
The retail trade union Usdaw is seeking urgent meetings with Debenhams’ administrators and called on the government to do more to save high streets.
Dave Gill, Usdaw’s national officer, said: “It is devastating news for our high streets that Debenhams’ administrators have sold the company brand to an online-only retailer. Throughout Debenhams’ difficulties, the company and then administrators have refused to engage with Usdaw; the staff are being treated appallingly.”
The union wants the government to extend business rates relief and help with millions of pounds of rents that have gone unpaid during the government’s high street lockdowns.
Boohoo plans to use Debenhams to help attract more mature shoppers and expand into new product categories beyond fashion. It also wants to begin selling brands it does not own for the first time from late spring, turning Debenhams into a marketplace, similar to Amazon or Zalando, with third-party labels handling distribution of their products sold on the site.
Debenhams made approximately £400m in online revenues in the financial year to 31 August 2020 and welcomed 300 million visitors, making it a top 10 retail website in the UK.
“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,” said Mahmud Kamani, the executive chairman at Boohoo.
“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.”
The company said that after the Debenhams deal it had £387m in cash to fund further potential acquisitions.
The deal with Boohoo marks a final rebuff for Mike Ashley’s Frasers Group, the owner of Sports Direct, which had been in talks to buy Debenhams for some weeks after failing to gain control of the department store before its first fall into administration in 2019.
Ashley is expected to try to take on a number of Debenhams stores from landlords to house his Flannels, Sports Direct and House of Fraser chains.
Shares in Asos rose almost 6% after it said it was in talks to buy the Arcadia brands.
The company said a deal would be funded from cash reserves and “represent a compelling opportunity to acquire strong brands that resonate well with its customer base”.
However, it said there could be “no certainty of a transaction and Asos will keep shareholders updated as appropriate”.
Chloe Collins, a senior analyst at the consultancy GlobalData, said: “The [Arcadia] brands are already popular sellers through its third-party platform, proving that there is strong customer overlap, and Asos’s impressive global reach would help the Arcadia brands target new shoppers.”