Deal marks final stage in break-up of Sir Philip Green’s Arcadia

Boohoo has agreed to buy Burton, Dorothy Perkins and Wallis out of administration, marking the final stage in the break-up of Sir Philip Green’s once-mighty fashion empire Arcadia.

The online-only retailer on Monday said it was set to acquire the digital assets and intellectual property of the brands for £25.2m.

As with recent acquisitions completed by Boohoo and its rival Asos — both of which have benefited from competitors’ shop closures during the pandemic — stores are not included in the deal, leaving behind thousands of jobs.

John Lyttle, Boohoo’s chief executive, said the deal ensured that the brands’ “heritage is sustained, while our investment aims to transform them into brands that are fit for the current market environment”.

Boohoo said Burton, Dorothy Perkins and Wallis had more than 2m customers last year and would help expand its business after the purchase of the Debenhams brand, for £55m, last month.

Burton, a menswear brand that is more than a century old with annual sales of £129m, will extend Boohoo’s limited range of menswear. Its existing BoohooMAN brand accounts for less than 10 per cent of group sales.

The transaction, which is expected to conclude on Tuesday, will lead to the closure of 216 shops across the UK occupied by the three brands, according to documents previously circulated by administrators Deloitte.

The three brands made about £428m in revenues last year, with a loss before interest, tax, depreciation and amortisation of £14.3m, according to Boohoo, which expects to integrate them into its platform within the next few months.

Boohoo has, over the past 18 months, become an opportunistic acquirer of troubled brands that have been hit by the pandemic, extending its reach beyond its core market of young trend-conscious female buyers. In August 2019, it snapped up Karen Millen and Coast and it bought Oasis and Warehouse last June.

The fast-fashion group’s short supply chains allow it to create designs based on outfits worn by celebrities that can be ordered online within days.

However, the cheap and fast turnround of clothes brings challenges, and Boohoo was last year rocked by evidence of widespread labour abuse among its UK suppliers, including illegally low wages and dangerous working conditions.

Boohoo has scrambled to show investors it can fix the problem but recent inspections at factories sparked concern as auditor reports showed “not one of them has adequate Covid governance in place”.

The acquisition of the final parts of Arcadia — after Asos last week announced it would buy Topshop — closes a chapter for UK high streets. When Green in 2002 acquired Arcadia for £850m, Asos’s revenues were just £4.1m and Boohoo did not exist.

Green improved profitability at Arcadia by cutting costs, and extracted some of the largest dividends in UK corporate history in the early 2000s. But a lack of investment and the rapid rise of rivals meant that by the mid-2010s, the brands were losing market share.

The coronavirus emergency, which forced repeated closures of the entire store estate and deprived the group of cash flow to service its debts, prompted the decision in November to call in administrators.


Source: Financial Times