Asos purchased Topshop and Topman in a deal with bankrupt Arcadia that strips the so-called “crown jewels” of their store presence, further decimating Britain’s high streets and reshaping the future of fashion.
Asos will acquire the brands, goodwill and inventory for 265 million pounds ($363.2 million), the fashion e-tailer said on Monday, in a deal that also includes Miss Selfridge and HIIT. Administrators at Deloitte, which is overseeing the Arcadia bankruptcy, said Asos will take on certain liabilities for future committed inventory orders, pegging the total deal value of 330 million pounds ($452.3 million). The transaction is expected to close on Feb. 4, 2021.
The Deloitte administrators said about 300 Arcadia employees across design, buying and retail partnerships will transfer to Asos. The loss of Topshop, Topman and Miss Selfridge leased stores would put many employees out of work.
Asos CEO Nick Beighton said purchasing “these iconic British brands” will go a long way toward advancing the e-tailer’s “multi-brand platform strategy.”
“We have been central to driving their recent growth online and, under our ownership, we will develop them further, using our design, marketing, technology and logistics expertise, and working closely with key strategic retail partners in the UK and around the world,” he added.
The transaction represents a compelling opportunity to support Asos’ mission to become the No. 1 destination for “fashion loving 20-somethings” worldwide, it added, complementing its status as the world’s fifth-most-popular fashion brand by search volume.
“These are strong brands that resonate well with our core customer base,” it said. “Brand equity is strongest in the U.K. and they have an established presence in both the U.S. and Germany, two of our key strategic markets,” the company said.
As new additions to Asos’ Venture Brands portfolio, the e-tailer aims to preserve their differentiated “brand and customer positioning.”
“This enhances our ability to increase choice for customers offering different customer styles, hero product and price points across our ASOS Brands,” it said. “The brands we have acquired are strong consumer facing brands that have continued to grow through key channels and we see a significant opportunity to drive further growth for these brands globally. We will do so through applying our industry leading design talent and online retail experience. They will also benefit from investment into customer engagement and brand positioning in line with our existing model.”
Part of that growth structure will include growing their global distribution. Noting its international warehouse operations, Asos said it hopes to leverages its Nordstrom partnership to expand these brands’ stateside presence and reach. The company will review the supply chain to ensure compliance with its “Fashion with Integrity principles,” and will re-engage suppliers and build stock to support future sales plans.
Asos said the deal will be fully funded through existing cash reserves. In 2019, the e-tailer said its brands posted total revenues of 1 billion pounds ($1.37 billion). Last year, brand sales coming from retail partners and online purchases totaled 265 million pounds ($363.2 million). In the 52 weeks ended August 2020, Topshop, Topman and Miss Selfridge posted an unaudited EBITDA (earnings before interest, taxes, depreciation and amortization) loss of 1.8 million pounds ($2.5 million) across all channels. HIIT, a sub-brand of Burton, was estimated to have generated a loss of 400,000 pounds ($548,234).
Separately, Deloitte said it is in exclusive discussions with a potential purchaser for Burton, Dorothy Perkins and Wallis, Arcadia’s remaining brands. Last week, Boohoo confirmed that it was in exclusive talks with Deloitte for those brands. Should Boohoo be successful, the deal would follow its agreement to acquire bankrupt Debenhams last week. Administrators previously sold Arcadia’s plus-size women’s brand Evans to City Chic Collective for 23 million pounds ($30.6 million).
The administrators said last week that they had asked suppliers to release inventory that was in transit or held up with freight firms. It said that title to the goods passed to Arcadia Group once they were shipped, and that administrators will make a goodwill payment once the items are released and received at distribution centers. They also said future orders placed will be paid in full at the administration’s expense. Any remaining valid claims against the Arcadia’s brands will be paid to unsecured creditors down the road via a dividend, presuming sufficient funds can be raised to pay those claims, Deloitte said.
The empire of Sir Philip Green’s Arcadia Group fell on hard times following the outbreak of the coronavirus pandemic, which has hit U.K. retailers hard, particularly after rolling national lockdowns. Arcadia collapsed into administration on Nov. 30, following that of Debenhams, Edinburgh Woollen Mill and a host of fashion firms across the pond.
The U.K. is currently on its third national lockdown, which could potentially continue through March. A new U.K. variant of Covid-19 was initially thought to be more contagious when identified at the start of 2021. More recently, Prime Minister Boris Johnson said new data indicates the highly transmissible variant is potentially more lethal than first thought.
Retail footfall remains challenged, according to new insights. Foot traffic data in the U.K. from Springboard showed an increase of just 0.4 percent for the week beginning Jan. 24, compared to the prior week. “Footfall across U.K. retail destinations last week remained virtually level with the week before, although this was largely due to severe weather which hit the U.K., particularly at the beginning and end of the week,” said Diane Wehrle, insights director at Springboard.
In addition, overall foot traffic saw a decline of 65.2 percent from the prior year’s levels. By category, U.K. high streets saw a 73.1 percent decline in foot traffic versus year-ago levels, retail parks were down 39.2 percent, and visitors at shopping centers fell 73.6 percent.