Boohoo Group said today that it had made an offer to buy the online business of Karen Millen and Coast and all associated intellectual property rights.
“The group believes that the online business of these brands would represent highly complementary additions to its scalable multi-brand platform and extend the group’s offer as part of its vision to lead the fashion ecommerce market globally,” its statement said.
However, there’s no certainty as yet that the discussions will lead to the acquisition of the two fashion brands. Boohoo said a further announcement would come “when appropriate”.
The move comes 10 months after Karen Millen bought the Coast online and concession business out of administration last October. Coast’s 24 stores were not included in that deal, with the loss of about 300 jobs. Another 600 staff, working in Coast’s concessions, its online business and head office, joined Karen Millen. At the time, Karen Millen said Coast had a “thiriving” future ahead of it and there there were room for expansion across its remaining sales channels.
Today’s announcement suggests that Boohoo, which itself is a pureplay as are its existing brands Nasty Gal and PrettyLittleThing, sees an even more pared-back future for Coast and parent company Karen Millen.
Although occasionwear specialist Coast saw its 24 UK stores close when it was bought by Karen Millen, it still sells from more than 100 department store concessions owned by Debenhams, House of Fraser and others. It has an international presence – primarily in malls and department stores in the Middle East and to a lesser extent in Northern Europe. Luxury womenswear business Karen Millen sells from 50 stores in the UK and from one in Germany. It is said to employ 1,000 staff in the UK.
Retail analyst Emily Salter of analytics and data business GlobalData says boohoo is an unlikely buyer for the two upmarket womenswear brands since its own brands offer fast fashion to 16 to 24-year-olds while Coast and Karen Millen are focused on shoppers aged between 25 and 45. She also said boohoo would find it hard to generate the rapid revenue growth that has characterised its previous acquisitions of previously relatively unknown brands.
“The acquisition risks devaluing Coast and Karen Millen as their success stems from high quality product and sophisticated designs, significantly different to the boohoo group,” said Salter. “Arguably, the brands would fit better into Phillip Day’s portfolio due to the similar target demographic and high street presence of the brands.
“boohoo is only interested in the online businesses of the brands, and though Coast now only has a physical presence in the form of concessions, the loss of this will be detrimental to sales. Stores are important for Coast and Karen Millen due to the higher value of products, so operating as an online pureplay is likely to significantly increase return rates. The closure of concessions will also be another blow to embattled department stores, in particular Debenhams and House of Fraser.”
She added: “The group excels at marketing, especially on social media to generate awareness and a buzz around its brands, so should use this strategy to inject renewed life into Coast and Karen Millen, if its offer is accepted.”
Today’s confirmation of a bid comes after Sky News reported that Boohoo was expected to buy Karen Millen in a pre-pack administration following the appointment of Deloitte as administrators. It said that, if completed, the move would come after a six-week sale process in which the retailer’s management and advisers tried to strike a solvent sale.
Karen Millen is a Top50 retailer in IRUK Top500 research, while Boohoo is ranked Top100, PrettyLIttleThing Top150 and Coast Top250.
Image courtesy of Boohoo Group