Online fast fashion retailer Boohoo, one of the few retail winners from the Covid-19 pandemic lockdown, has moved to acquire the Oasis and Warehouse brands in a £5.25 million deal. Boohoo acquired the two brands from restructuring firm Hilco, which bought both out of administration two months ago.
Between them, Oasis and Warehouse made £46.8 million in online sales over 2019 and Boohoo intends to relaunch the brands in an online-only format. The company will not be taking on any of the retailers’ real estate or the almost 2000 floor staff made redundant when the two chains collapsed into administration.
Markets reacted to the acquisitions by driving the Boohoo share price over 9% higher in morning trading today. Since a rapid recovery from a brief share price slump in March when Boohoo was caught up in the mass market sell-off, the company has gone on to regularly set new highs, starting from the tail-end of April. At the time of writing, its share price sits at a little over 35p.
The company chose to make its move as it capitalises on the momentum gathered from a 45% jump in year-on-year sales over the three month that ended on April 30th. Boohoo also recently raised £200 million in fresh cash through a rights issue, part of which was earmarked for the attractive acquisition opportunities the Covid-19 pandemic was expected to throw up as retailers struggle.
Oasis and Warehouse are added to a growing stable of brands now owned by Boohoo, alongside Nastygal, Miss Pap, Karen Millen and Coast. The 33% of Prettylittlething Boohoo didn’t already owned was last month acquired from co-founder Mahmud Kamani’s son Umar Kumani for £330 million.
The move was seen as a direct response to the notorious hedge fund Shadow Fall, which shorted the company’s stock and released a report criticising its accounting practises and warning investors it could cost as much as £1 billion to buy the younger Mr Kumar out of his holding in Prettylittlething. It certainly outflanked Shadow Fall, which can be presumed to have suffered heavy losses on its short position as a result of the subsequent gains for the Boohoo share price.
With bricks-and-mortar clothing shops deemed ‘non-essential’ retail and forced to remain closed for the past three months, Boohoo’s online-only model has reaped dividends. The company says demand for ‘athleisurewear’ and homeware saw an especially pronounced surge as the company’s core demographic of young fashion shoppers bought ‘lockdown outfits’.
The result was a rise in sales to £367.8 million during the company’s first accounting quarter to the end of April. UK sales were up 30% to £183 million, with the remainder generated from international operations. The results were particularly positive against the backdrop of a “marked year-to-year decrease” in sales figures during the early stages of the coronavirus crisis from mid-March to early April.
The company’s forward guidance is currently for a year of “strong and profitable growth”, that is expected to come in ahead of analyst expectations for 25% improvement on 2019 sales figures. Boohoo appears confident its business model’s resilience over the Covid-19 pandemic will see it smash those figures.
Chief executive John Lyttle commented:
“During unprecedented and challenging times, the group has delivered a very strong trading and operational performance . . . Whilst there is a period of uncertainty within the markets in which we operate, the group is well-positioned to continue making progress towards leading the fashion e-commerce market global.”
Shore Capital analyst Greg Lawless believes that Boohoo’s track record with previous acquisitions bodes well for a smooth integration into the group for Oasis and Warehouse, saying:
“The company has shown through the acquisitions of Miss Pap, Karen Millen and Coast that it has the integration skills to develop new brands across the group and has shown its continued appetite with the acquisition of the Warehouse and Oasis brands.”
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