Boohoo shares rally on potential Karen Millen acquisition

Boohoo shares rally on potential Karen Millen acquisition

Online fashion retailer Boohoo Group PLC (LON: BOO) has seen its share price rally on Tuesday morning, following news of its potential acquisition of clothing brands Karen Millen and Coast.

The online retailer specialises in own-brand fashion, and has acquired Little Thing and Nasty Gal (2017) since its inception in Manchester in 2006. The Company currently has 13 million active customer accounts across its existing brands globally – and has potential to grow depending on its strategy following the prospective acquisition of Karen Millen.

The Karen Millen holding company saw losses of £5.7 million in the year ending February 2018, following losses of £11.9 million the previous year. In June, its Icelandic owners Kaupthing Bank put it up for sale.

Any potential deal for Karen Millen would see parts of Coast included in the deal, after the brand was acquired out of administration last autumn by Kaupthing.

However, as yet Boohoo have not made clear what they would do to the highstreet offerings of Karen Millen, or more specifically whether or not they would make any guarantees about the jobs of the Company’s existing staff members.

Combined, Karen Millen and Coast employ 1,100 people throughout 32 stores and 177 concessions in the UK, with Ocean also holding concessions in the Middle East, Singapore and Malaysia.

Sales proceedings have been going on for six weeks and are being led by Deloitte, through a process of pre-pack administration.

Comments on Boohoo acquisition of Karen Millen

Richard Lim, chief executive of Retail Economics, said pre-pack administration allows buyers, “to dispose of the parts of the business that they deem unprofitable”.

“In the case of Boohoo, they are looking at value in the online proposition of Karen Millen, and they probably prefer to pick it up as a pre-pack, which will enable them to dispense of the physical stores,”

He continued, “It is well known Karen Millen has been struggling in the past few years. But Boohoo will look at it and see another potential revenue stream.

“Karen Millen is a different customer segmentation for them, but one that I think could flourish as an online-only proposition. Boohoo will use all the expertise they have acquired in recent years using social media, and bring the brand to a newer audience.”

Investor notes

The Company’s shares are up 3.52% or 8.10p to 238.20p a share 06/08/19 12:22 BST. Analysts from Peel Hunt and Liberum Capital reiterated their respective ‘Buy’ stances on Boohoo stock. The Group’s p/e ratio is 54.40 and their dividend yield is currently not available.

Elsewhere in retail and on the highstreet, there have been updates from; Burberry Group plc (LON: BRBY), Associated British Foods plc (LON: ABF), H&M (STO: HM-B), Sports Direct International Plc (LON: SPD), and Superdry (LON: SDRY).