Online retailer Boohoo has acquired Debenhams for £55m in a deal that will see the closure of the high street retailer’s remaining stores and the likely loss of up to 12,000 jobs.
Boohoo, which is also buying the brands Maine, Manataray, Principles and Faith, said the remaining stores will be wound down when they are in a position to reopen.
The 242-year-old Debenhams chain is already in the process of closing down, after administrators failed to secure a rescue deal for the business and its remaining 124 stores and 12,000 staff. The company announced recently that six of those shops would not reopen after lockdown, including its flagship department store on London’s Oxford Street.
“The group will only be acquiring the brands and associated intellectual property rights,” said Boohoo. “The transaction does not include Debenhams’ retail stores, stock or any financial services.”
Debenhams made approximately £400m in online revenues in its most recent financial year to 31 August 2020.
Boohoo said the Debenhams website receives 300m visits a year, making it a top 10 retail website in the UK by traffic.
“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, 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.”
John Lyttle, the Boohoo chief executive, said the company is still “working through the numbers” on how many jobs might be saved but that there were “no definitive numbers at this point”. Some jobs in beauty are expected to be saved.
He said Debenhams will operate as a digital “shop window” for Boohoo’s brands, including Pretty Little Thing, and third party retailers. Boohoo will take a commission on third party sales, but not responsibility for delivery or customer service, and Debenhams is likely to be expanded internationally in the future.
“Initially we want to get the [Debenhams] marketplace launched in the spring to early summer,” said Lyttle in a call with analysts. “Across the group just under half of our revenues are made internationally, so there is an opportunity to launch the marketplace in international markets over time.”
He also added that strong Debenhams brands, such as Principles, Maine and Faith, could get their own standalone retail websites as well as being sold within the marketplace, as Boohoo’s brands do. Lyttle said that post-acquisition Boohoo will still have more than £300m in cash and that the company will continue to keep an eye out for further acquisitions.
Boohoo has taken advantage of the damage the pandemic has wrought on traditional retailers, having already bought the Oasis, Coast and Karen Millen brands out of administration, but not their high street stores.
Susannah Streeter, the senior investment and markets analyst at Hargreaves Lansdown, said the acquisition marked a significant moment for Boohoo and for retail.
“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,” she said.
“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.”
Shares in Boohoo rose 4% after the detail was announced on Monday.
Debenhams had been trying to find a buyer since the summer, but its administrators – which have been running the business since April – said they had not received “a deliverable proposal”.
The department store traces its roots back to 1778 when William Clark established a drapers store on Wigmore Street in the West End of London. Its current name stems from 1813 when William Debenham invested in the company, which became Clark & Debenham.
Last year, Debenhams entered rescue talks with JD Sports but the sports retailer pulled out of the talks when Arcadia, the parent company of brands including Topman, entered administration. Arcadia operated more concessions in Debenhams than any other retailer and Arcadia is believed to have sold about £100m of clothing a year via Debenhams shop floors.
On Monday, online retailer Asos confirmed that it is in exclusive talks to buy a number of Arcadia’s brands.