BooHoo has reasons to be cheerful – but Asos is on track for the top prize

BooHoo found Debenhams on the corporate sale rail. The deal doesn’t include its stock, stores or financial services business. The stock market liked that but it liked Asos’s potential purchase of TopShop even more, writes James Moore

The Debenhams brand has been bought by BooHoo, but the stores look doomed (Getty Images)

Knocked out of the battle for TopShop, there were no tears from BooHoo which started the week with a bang by announcing that it had secured a consolation prize in the form of Debenhams.

Well the brand, at any rate. There doesn’t look to be any future for the stores of either of the former retail kings.

The £55m BooHoo is paying is a bargain rail price. It casts Debenhams in the role of one of those end of line garments sold at 70 per cent off in one of the sales the lords of the virtual high street have running throughout the year.

BooHoo’s fast fashion rival Asos is set to pay a lot more for TopShop, with talk of as much as £300m doing the rounds. The potential price has already scared off Next, despite the latter having a hedge fund in tow to help out.  But there are said to be a couple of rival suitors waiting in the wings if Asos, which is now in exclusive talks over a deal, fails to reach the checkout.

There’s a reason for that. TopShop was the jewel in the broken crown of Sir Philip Green’s Arcadia empire. It was doing fast fashion before fast fashion became a thing people talked about, and doing it well until it got left behind as a result of its owner’s failure to recognise that clicks were destined to takeover from bricks.

TopMan, Miss Selfridge and HIIT, also part of the package, are just the icing on the cake.

For its part BooHoo tried to buff up its deal as a “strategic acquisition to develop an online marketplace”. That’s corporate guff to explain that it’s going to try to  outfit its business with some diversification.

Will this wear well with what it’s been doing very successfully to date? There are some grounds for optimism, especially when it comes to the beauty products its existing customers tend to be quite keen on. Despite its sad fate, Debs is also a well known brand with a busy website. 

Moreover, with BooHoo having nearly £400m in cash on its books, the purchase price represents so much small change, especially when you consider that it doesn’t have to worry about the stores, stock or Debs’ financial services business.

The plans are for the brand to be relaunched on BooHoo’s platform early next year, after the existing business has been wound up.

But it isn’t risk free. Fast fashion is a sector that will deliver a fast kicking if you take your eye of the ball for even a moment.

Its rival’s experience a couple of years ago speaks to that. Asos got the 2019 Black Friday event badly wrong,  underestimating its rivals’ price cuts and getting hammered as a result. A profit warning followed, one of two that year. The company’s troubles proved temporary. It roared back and is now in a position to be the king of clothes. 

But this is something BooHoo will need to be aware of. Brand loyalty lasts only so long as your clobber is both cheap and exciting and your service passes muster. That requires a laser-like focus.

The stock market clearly thinks BooHoo can pull it off; it gave the deal a warm reception. The shares, which have been under the cosh of late, were marked up in the wake of the announcement.

But in percentage terms, Asos was the bigger riser as investors drooled over the potential of what it’s in the box seat to buy.

The deal in its shopping basket might be pricier, but it makes for a much less complicated proposition. TopShop is a top prize for those picking over the wreckage of the traditional high street.