UK retailing shifts further online as Boohoo buys Debenhams

Dawn breaks behind the London Eye ferris wheel a commuters make their way over Westminster Bridge in London, Monday, Jan. 18, 2021. (AP Photo/Alastair Grant)

LONDON (AP) — Around 25,000 U.K. retailing jobs remain under threat even as it emerged Monday that online fashion firm Boohoo has bought Debenhams, one of the country's oldest department store chains, and rival ASOS confirmed it wants to pick up parts of Arcadia Group.

The developments illustrate the huge changes taking place in Britain's retailing scene during the coronavirus pandemic. With shops selling non-essential items closed once again, many retail outlets, big and small, face the prospect of closing for good.

Boohoo's acquisition of the Debenhams brand and website for 55 million pounds ($75 million) will see it turn a traditional retailing outlet into an online-only operation.

The Debenhams name will survive, but the 118 stores will close for good as Boohoo sees little value in them when so much shopping now takes place online, a shift that has been accelerated by the coronavirus restrictions.

Debenhams, which traces its history back to 1778, employs around 12,000 workers so the closure of the stores is likely to see most of those jobs lost. After years of struggle, Debenhams announced in December that it faced the prospect of going bust if it couldn't find a buyer.

Under the terms of the deal, Boohoo will sell Debenhams products from early next year. Boohoo said the deal represents a “fantastic opportunity” to target new customers and launch into beauty, sports and homewares.

“The acquisition of the Debenhams brand is an important development for the group, as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail," Boohoo's CEO, John Lyttle, said.

Investors welcomed the move, with Boohoo's share price up 4.4% in morning trading.

However, Shore Capital retail analyst Greg Lawless cautioned that an online-only operation could hit Debenhams’ beauty sales.

“The big question in beauty is whether the big beauty brands — Clinique and Chanel — will remain with Boohoo longer term," he said. “The Debenhams number one position in premium beauty was predicated on counter sales, which will not form part of this acquisition.”

Boohoo has previously several struggling U.K. brands, including Oasis and Coast, turning them into online-only operations.

Geoff Rowley, joint administrator for Debenhams and partner of FRP Advisory, said the purchase of Debenhams “may provide some job opportunities” while accepting that the deal "does not safeguard the jobs of Debenhams’ employees beyond the winding-down period.”

Separately, another online retailer, ASOS, confirmed it is in exclusive talks to buy some of Arcadia’s brands — Topshop, Top Man, Miss Selfridge and the fitness range HIIT. It warned there was no certainty of a deal.

Any deal is unlikely to include saving the Arcadia stores, which could also close for good.

Arcadia, which employed around 13,000 people and has 444 U.K. stores, also collapsed at the start of December. As well as suffering during the pandemic, analysts said billionaire owner Philip Green failed to invest enough in the brands and keeping up with shifts to online shopping.

Investors also warmed to the prospect of a deal, boosting ASOS's share price by 6% in London.

“If the ASOS deal goes through as well, it means great swathes of the high street will be left empty,” said Susannah Streeter, senior investment and markets analyst at stockbrokers Hargreaves Lansdown.

“Spaces in prime locations are likely to be snapped up, but large shells of stores in towns and cities up and down the country are likely to stay boarded for some time,” she added.

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