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Asos joins as contender in the race for Topshop
Source: Mintel 25-01-2021

UK 25-01-2021

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Asos and the Issa brothers, who own Asda, have emerged as the latest contenders for Arcadia’s Topshop. This follows as Next announced on Friday that it was withdrawing its interest in the brand, stating it was “unable to meet the price expectations of the vendor”.

Other contenders include Authentic Brands, G-III Apparel and Shein.

Mintel comment:


“Two acquisition stories today, one confirmed and one ongoing which serve to underline the significant shifts within the retail sector that COVID-19 has brought.

Both Debenhams and Arcadia had significant issues prior to the pandemic and COVID-19 has only accelerated these underlying issues. Both businesses would have needed restructuring and potentially new owners in the coming years irrespective of the pandemic. However, the unique element brought by COVID-19 is that the multiple periods of store closures, and the shift to online, has significantly favoured online-only players, and significantly limited the number of suitors.

Indeed as an example in the four months to the 31 December, ASOS sales grew 36% in the UK while Boohoo sales were up 40%. A direct comparison, due to reporting periods is not possible, but in the nine weeks to 26 December Next, one of the best store-based players to manage the pandemic and an initial front runner for Arcadia, matched this level of online growth (+36%) but store sales naturally fell 43% leading to an underlying decline of 0.5%. Next was interested in Arcadia, but the pandemic has made the business consider its core space needs, let alone take on Arcadia’s significant store portfolio.

The result is a very narrow pool of suitors and even fewer who would be willing, in the current climate, to take on the store networks of these two businesses. Debenhams acquisition by Boohoo will remove the brand from the high street, and this is incredibly sad for both staff and for the sector to lose a stalwart of the UK high street. However from a business point of view, the deal looks good for Boohoo – it is paying £55 million in cash for a business with online revenues of £400m, and its move to make this an online platform, one where its other recent acquisitions can find a home, makes a good deal of sense. If anything this deal is likely to spur on further acquisitions, particularly in beauty, to fully support the private label focus at the core of the Boohoo strategy.

The Arcadia saga will likely come to a close, either way, this week and while ASOS says talks are ‘exclusive’ – others interested parties, including the new Asda owners the Issa brothers, will be looking on with significant interest. Again, the ASOS deal will take the brands online, which will again mean stores are closed and jobs are lost. The fact that the most value that could be secured by the administrators could come from selling just the brand and online operation, excluding stores, rather than the entire operation tells you all you need to know about the current view of the high street. Much will be written about this, being an indication of the ‘death of the high street’, and the loss of Arcadia and Debenhams will be a significant blow to many high streets across the UK. However there will still be significant opportunity at store level post-pandemic – but in the case of these two businesses it appears that the level of investment needed to reinvigorate stores is beyond most in the current circumstances.”