Shares jumped 3% at UK online fashion retailer Boohoo in early morning trade today (6 August) following the group’s confirmation it has made an bid to acquire the Karen Millen and Coast fashion brands.
Boohoo, responding to media speculation, said it believed “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 e-commerce market globally.”
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It added the discussions “may or may not result in the agreement of a transaction” and it would make a further announcement when appropriate.
Earlier this year Boohoo acquired online brand MissPap.
Greg Lawless, analyst at Shore Capital comments: “In our view, Boohoo was always looking to potentially add to its stable of brands. Comparisons could be made with Inditex who operate 8 brands. Boohoo currently has four brands trading today (Boohoo, Pretty Little Thing, Nasty Gal and Miss Pap). We will watch developments with interest.”
But Emily Salter, retail analyst at GlobalData, believes the brands are “an unlikely fit” for the fast-fashion focused group.
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By GlobalData“The Boohoo group seems an unlikely suitor for premium womenswear brands Karen Millen and Coast, a far cry from its previous acquisitions of MissPap and Nasty Gal which both operate in the area of the market it specialises in – fast fashion for 16-24 year olds.
“Karen Millen and Coast, however, have strong reputations for quality occasionwear, targeting a core demographic of 25-45-year-old shoppers. This contrasts with Boohoo’s focus on selling a high volume of product quickly, offering frequent promotions, and using social media as an important marketing method.
“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. Arguably, the brands would fit better into Phillip Day’s portfolio (Spectre Holdings) 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.
“As Coast and Karen Millen are well-established brands, Boohoo is likely to find it hard to generate rapid revenue growth, in contrast to the impressive growth of PrettyLittleThing and Nasty Gal which were acquired as small, relatively unknown brands. 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.”
