Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Fashion regularly takes inspiration from the past and adds a modern twist. British fast-fashion retailer Boohoo has duly delved into history as it tries to dig its way out of the sales bucket. It has rebranded as Debenhams Group as it tries to regain even a fraction of its pandemic-era shine.
The group is right to pin its fortunes to the storied British brand. But it may have to look further, to the corporate break-up trend, if it really wants to inspire.
Boohoo acquired the brand of Debenhams, the former 200-plus year-old British department store chain, out of administration in 2021. It has since reinvented it as an online marketplace, borrowing from the business models of Temu and Amazon. Suppliers pay to sell through Debenhams but the former are still responsible for dispatching goods.
There is irony in the rebrand. Debenhams collapsed into administration — twice — for many reasons. But one was its inability to compete with online disrupters such as Boohoo and rival Asos. Both were worth more by market capitalisation than another historic UK retailer, Marks and Spencer, for much of 2020 and 2021, when lockdowns lit a fire under online retail shares. Boohoo’s market capitalisation peaked at £4.82bn in 2020. It is now less than £380mn.
Since then, shoppers have returned to physical stores in greater force than anticipated. Fast-fashion upstarts made costly mistakes, too. Boohoo splashed cash on more UK distribution centres, as well as one in the US, only to swiftly close them. Last year it had to raise equity and sold its London office to help repay a £97mn loan — part of a contentious £222mn refinancing that angered its biggest shareholder, Mike Ashley’s Frasers Group.
It is not hard to see why Boohoo’s CEO Dan Finley thinks Debenhams is the group’s future. Sales at the online marketplace grew 10 per cent in the fiscal year just ended, the company said on Tuesday. It has healthy ebitda margins of 12 per cent, which Finley reckons should eventually reach 20 per cent. Sum of the parts calculations suggest the Debenhams business alone is worth more than 85 per cent of Boohoo’s current market value.
For this to emerge through, Finley needs to tie up loose ends. Sales at Boohoo’s “youth brands”, including PrettyLittleThing, dropped 21 per cent. House broker Panmure Liberum expects further double-digit declines for the next two years. To boot, Boohoo will book a £40mn writedown on youth brand stock at full-year results — slightly less than the £44mn annual operating profit analysts anticipate.
The glory days of Britain’s homegrown fast-fashion scene are long past. Finley is trying to turn the youth brands around but they seem most exposed to competition from the likes of Shein. If he wants Boohoo to find its new style, he would do well to find a buyer for them.
