10,000 jobs to go as Boohoo buys Debenhams for £55m
Boohoo has bought up the Debenhams brand but not its stores in a £55m deal, meaning some 10,000 staff are set to lose their jobs as the 243-year-old department store chain disappears from the high street.
John Lyttle, chief executive of Boohoo, said the move was “the next chapter for Debenhams” and a guarantee that “it's still around in the future”.
The fast-fashion group, set up just 15 years ago, will relaunch Debenhams as an online-only operation in March. Its 116 stores will close for good as part of a winding-down of the business once the lockdown restrictions are lifted.
Separately, online rival Asos confirmed it is in exclusive talks to buy the the Topshop, Topman, Miss Selfridge and HIIT brands from Sir Philip Green’s collapsed Arcadia empire, but it warned there was no certainty of a transaction.
The company could retain Topshop’s flagship store on Oxford Street if a deal goes ahead, but it would not acquire any stores either with thousands more jobs at risk.
Richard Hyman, an independent retail analyst, said: “Over time, there has been consistent disinvestment when they both [Debenhams and Arcadia] need the exact opposite and the writing was on the wall. The fact that what used to be much smaller newcomers [Boohoo and Asos], they were more agile, more focused, they were the beneficiaries of investment over the years and they are still investing.”
Mr Lyttle said: “We have grown fast because we’re resonating with our customers on product and marketing. That’s allowing us to take advantage of acquisitions of some brands that haven’t been as good as we have been.
“It’s going to be just online and we see that as a huge part of how consumers shop today and how they are going to shop in the future.”
Boohoo’s boss declined to comment on whether it was still in running for the remaining Arcadia brands. Sources have said the group wants to buy Dorothy Perkins, Wallis and the Burton for about £25m.
The closing down of Debenhams'’ remaining branches will now affect just over 1m square metres of retail floor space in England and Wales, according to Altus, the real estate adviser – the equivalent of 148 football pitches. That would leave landlords with an annual business rates bill of of about £50m if new tenants cannot be found.
The firm said the deal will allow it to burnish its beauty credentials, a lucrative part of the sector where Debenhams has been a major player. Debenhams holds the highest market position in make-up and is number two in skincare in the UK.
Mr Lyttle added that Boohoo will retain some staff, including the beauty team, to ensure a smooth transition. It also wants to sell more sportswear and homeware as it seeks to lead the e-commerce fashion market.
“We’re confident that they [staff] will be coming over to us and their key relationships with these [beauty] companies,” he said.
Estee Lauder, the American beauty giant, has decided to close all its cosmetics counters in Debenhams, the Sunday Times reported this week.
The transaction will be financed through the group’s existing cash balance. The company has been on an aggressive acquisition spree of distressed rivals, including the recent purchases of Oasis, Warehouse, Coast and Karen Millen.
The son of Boohoo co-founder Mahmud Kamani tweeted it was “mad that we used to go into Debenhams every Saturday looking for cheap TVs with my dad”.
The Kamani family has gone from rags to riches in just two generations, having sold clothes to market stall holders and high street brands before setting up Boohoo.
Administrators for Debenhams said a closing down sale will continue in stores for several weeks when pandemic restrictions are lifted and until the stock liquidation is completed.
Geoff Rowley, joint administrator and partner of FRP, said he was pleased with the deal. Lawyers at Freshfields Bruckhaus Deringer advised Debenhams.
“I expect that the agreement with Boohoo may provide some job opportunities but we regret that this outcome does not safeguard the jobs of Debenhams’ employees beyond the winding down period,” Mr Rowley added.
Debenhams collapsed into administration in December last year after virus-induced store closures pushed it over the brink. The retailer, which traces its roots back to 1778, originally filed for administration in April.
Other bidders included Mike Ashley’s Frasers and JD Sports. Frasers could still be interested in some department stores. JD Sports pulled out of rescue talks in December.
Analysts at Peel Hunt said the Boohoo deal was a “sound acquisition strategically” and would take the group into a much older demographic: “There will be questions over whether all beauty brands wish to continue to trade with the group and how well Boohoo builds relationships with the leading sports brands for a wider athleisure and sport offer, but these are questions for the longer-term performance.”
Shares in Boohoo rose 4.7pc to 348p, while Asos climbed 5.6pc to £50.56.
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