UK-based online fashion retailer Boohoo has acquired the online business of the Karen Millen and Coast fashion brands in a GBP18.2m (US$22.1m) deal.
The deal includes all associated intellectual property rights of Karen Millen Fashions Limited and Karen Millen Retail Limited, both of which went into administration today (6 August). The brands had recently been put up for sale by Icelandic bank Kaupthing.
Boohoo says the brands, which specialise in dresses and tailoring, 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.”
Unaudited management information shows that direct online sales from the websites of Karen Millen and Coast totalled GBP28.4m in the most recent financial year to February 2019.
“The acquisition of the online business of two great and renowned British brands in Karen Millen and Coast represents another milestone in the group’s growth story as it continues to invest in its scalable multi-brand platform and gain further share in the global fashion e-commerce market,” says John Lyttle, Group CEO.
Karen Millen and Coast have 32 stores and operate through 177 concessions in the United Kingdom, employing around 1,100 people in the UK and with a head office in London. There have been 62 immediate redundancies.
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By GlobalDataAdministrators say the international arm of the business will continue trading in the short term.
Like many high street retailers, Karen Millen has suffered from high product and other cost inflation, decreasing footfall, weaker consumer confidence and a complex global operation in an increasingly competitive market.
“As we continue to see, the retail trading environment in the UK remains extremely challenging,” says Rob Harding, joint administrator at at Deloitte.
“Karen Millen has been seeking to address the financial challenges that it faced by pursuing a sale of the business and, whilst a sale of the whole business has not been deliverable, the Boohoo transaction facilitates the survival of these iconic British brands through an online platform.”
An unlikely fit
Boohoo currently has four brands – Boohoo, Pretty Little Thing, Nasty Gal and Miss Pap, which it acquired earlier this year.
However, Emily Salter, retail analyst at GlobalData, believes Karen Millen and Coast are “an unlikely fit” for the fast-fashion focused group.
“The Boohoo group seems an unlikely suitor for premium womenswear brands Karen Millen and Coast, a far cry from its previous acquisitions of MissPap and Nasty Gal which both operate in the area of the market it specialises in – fast fashion for 16-24 year olds.
“Karen Millen and Coast, however, have strong reputations for quality occasionwear, targeting a core demographic of 25-45-year-old shoppers. This contrasts with Boohoo’s focus on selling a high volume of product quickly, offering frequent promotions, and using social media as an important marketing method.
“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. Arguably, the brands would fit better into Phillip Day’s portfolio (Spectre Holdings) due to the similar target demographic and high street presence of the brands.
“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 products, so operating as an online pure-play 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.”
