British online retailer Asos has announced the acquisition of Topshop, Topman, Miss Selfridge and HIIT brands for 265 million pounds. The company said that the transaction is fully cash funded from existing cash reserves. Additionally, Asos will purchase 30 million pounds of stock upfront to support initial trading before these brands are migrated into the normal working capital cycle.
Commenting on the development, Nick Beighton, Asos CEO, said in a statement: “ The acquisition of these iconic British brands is a hugely exciting moment for Asos and our customers and will help accelerate our multi-brand platform strategy. We have been central to driving their recent growth online and, under our ownership, we will develop them further, using our design, marketing, technology and logistics expertise, and working closely with key strategic retail partners in the UK and around the world.”
Topshop, Selfridge and Arcadia other labels to strengthen Asos portfolio
The company said: “These are strong brands that resonate well with our core customer base. Brand equity is strongest in the UK and they have an established presence in both the US and Germany, two of our key strategic markets.”
The company added that these acquired brands will join its Venture Brands portfolio alongside others including Collusion, AsYou and Reclaimed Vintage. Asos plans to maximise the opportunity for the brands global distribution and its international warehouse infrastructure and localised online experiences will support continued growth through the company-owned platform. The company also aims to increase the brands’ reach and accelerate US strategy via partnership with Nordstrom in this key market.
In 2019, before impact of Covid, the brands delivered total revenues of approximately 1 billion pounds across all channels and despite business and supply challenges over the last year, the brands continued to grow through online and retail partnership channels, with total revenues in 2020 of approximately 265 million pounds as brand sales via retail partners grew 16 percent and brand online sales grew 5 percent, while growth on Asos platform has been at 41 percent in P1 FY21.
Asos to focus on new brands’ integration in FY21
In FY21, Asos expects any incremental EBITDA to be offset by initial investment and ramp up costs as the focus would be on integration, engaging with retail partners and rebuilding stock to support trading plans. Additionally, the company expects to incur one-off restructuring and transaction costs of 20 million pounds.
We anticipate incremental sales in FY22 to be broadly flat to FY20 acquired brand sales as the company focused on driving growth on our ASOS platform and through select strategic retail partnerships. The acquisition is expected to be margin accretive, with strong operating leverage given the relatively low incremental costs of operation once integrated onto the Asos platform. The company expects the transaction to deliver a double-digit return on capital (post tax) in the first full year.
In the most recent 52 weeks ended August 29, 2020 Topshop, Topman and Miss Selfridge made an unaudited EBITDA loss of 1.8 million pounds across all channels. HIIT was a sub-brand of Burton, which Asos has chosen not to acquire. It is estimated that the brand generated a loss of approximately 0.4 million pounds across all channels.