Fast-growing pure-play online fashion retailer Boohoo is preparing to acquire the Karen Millan and Coast brands.
According to sources quoted by Sky News, Karen Millen will be placed in administration as early as today, UK time, in what is termed a “pre-pack administration” where the new buyer acquires the assets relatively unencumbered.
In a statement, Boohoo’s board confirmed it was making a bid. “The board confirms that it has made an offer to acquire the online business of renowned British brands Karen Millen and Coast, together with all associated intellectual property rights.”
The deal – assuming it proceeds – is remarkable in that it reflects the power of new-generation online retailers being in a place to pounce on struggling brands like karen Millen, itself an icon of the high-street fashion scene.
Boohoo Group, listed on AIM, a subsidiary of the London Stock Exchange, owns a controlling share in PrettyLittleThing. Last month, thanks to an association with reality TV series Love Island and high-profile celebrity endorsements, Boohoo overtook Asos as the most valuable online fashion retailer in the UK, its valuation touching £2.35 billion. Its share price has surged 29 per cent this calendar year.
“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 e-commerce market globally,” the statement read.
According to Sky News’ sources, Karen Millen is about to appoint Deloitte as administrator of the business, preparing the way for Boohoo to proceed with the purchase. However, Boohoo warned the deal was not assured.
“These discussions may or may not result in agreement of a transaction. A further announcement will be made when appropriate.”
The two fashion labels have been on the market for six weeks during which management attempted to secure a sale of the business while it remained solvent. Karen Millen bought Coast out of administration last October. Karen Millen and Coast were both previously owned by Icelandic bank Kaupthing.
Emily Salter, retail analyst at GlobalData, believes Boohoo is an unlikely suitor for premium womenswear brands Karen Millen and Coast – which are vastly different to its previous acquisitions of MissPap and Nasty Gal which both operate in the fast fashion for 16-24 year olds.
“Karen Millen and Coast have strong reputations for quality occasionwear, targeting a core demographic of 25-45 year old shoppers. This contrasts Boohoo’s focus on selling a high volume of product quickly, offering frequent promotions, and using social media as an important marketing method,” said Salter.
“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. 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 their 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,” Salter concluded.
