Can Topshop and its sister brands ever return to their trendsetting glory days with Asos now at the helm?
Asos won the bidding race for Topshop, Topman, Miss Selfridge and HIIT, the flagship brands in now-defunct Arcadia Group.
The price of the deal was 330 million pounds, minus the store portfolio, and some would argue that Asos picked up a bargain.
It’s a price that would have been “of much higher value, just some 10 months ago,” before retailers were faced with store closures and operational challenges, said Maria Bogdanova, consultant at Euromonitor International.
The online giant bought the brands, intellectual property and inventory in a deal that mirrors Boohoo’s acquisition last week of Debenhams.
Asos already has a plan in place about how it wants to use the new brands and how it will transform them into “digital-first” companies. The company said Monday it wants to integrate them onto the Asos platform; “elevate” the digital experience; and strengthen branding through refreshed design and marketing.
This means that there’s a lot of potential for Topshop to gain back some of its authority in fashion, retail and celebrity.
For generations of teenagers and young adults, Topshop had been a fashion destination and multi-brand emporium selling makeup, accessories, jewelry and even cupcakes from its buzzy ground floor space on Oxford Street.
It offered everything from denim to evening wear to designer and celebrity collaborations and offered a thrilling journey years before “experiential shopping” became a buzzword.
In the 20 years that he owned the store, Sir Philip Green brokered deals with the likes of Kate Moss, Beyoncé, Kendall and Kylie Jenner for clothing, lingerie and makeup; the store actively scouted and supported young talents including Jonathan Anderson and was a headline sponsor of London Fashion Week, bankrolling its own large-scale venue during shows.
A little over two years ago, Topshop was hosting shows for designers including Preen by Thornton Bregazzi, Nicopanda, Shrimps, Molly Goddard and Charlotte Knowles.
Topshop will certainly be a different brand under Asos as the closure of its stores and particularly the Oxford Street flagship, which was as much a tourist attraction as it was a retail store. Its closure will leave a void on the high street.
“Topshop in particular will certainly be missed from high streets across the U.K. However, as shoppers become ever more accustomed to purchasing online, Asos’ digital prowess will aid the brands in gaining the revival they so desperately need,” said Chloe Collins, senior apparel analyst at Global Data.
“Full integration onto the Asos platform is the best route to success as the brands’ own online offers have always been behind the competition. Asos’ impressive global reach will also help the brands target new international shoppers.”
Collins added that Asos’ plans to boost Topshop’s partnership with Nordstrom “will hopefully reignite U.S. shoppers’ love of the brand following the closure of its physical stores there in 2019.”
The Nordstrom tie-up is a vestige of an unsuccessful U.S. rollout by Topshop nearly a decade ago.
In 2012, Topshop’s heyday, Green inked a deal with Leonard Green & Partners to expand Topshop and Topman into the U.S. Their plan was to generate $1 billion in revenue from the Topshop and Topman brands and to double the brands’ worldwide sales over the subsequent three to four years.
At the time, the deal valued Topshop and Topman at $3.22 billion. But the two Greens never reached their target, although the Topshop brand gained traction at Nordstrom, where it continues to sell.
Asos, which already sells Topshop on its multi-brand platform, said the overlap between its own customer base and that of Topshop was part of the attractiveness of the deal, as was the fashion retailer’s established presence in international markets, including the U.S. and Germany.
“The acquisition will help accelerate our multi-brand platform strategy,” said Nick Beighton, chief executive officer of Asos. “We have been central to driving (the Arcadia brands’) 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 U.K. and around the world.”
Analysts saw the deal from a positive light and said it would be a big boost for Asos, whose shares shot up 7% to 4.80 pounds after the announcement of the transaction.
According to Euromonitor, the acquisition secured Asos’ place among the top five online players in the apparel and footwear e-commerce space. The deal will also ensure that Asos gets an advantage over its competitors, as it will now be offering a “better balanced” product assortment between the Asos brand and third-party labels.
“The deal is offering a solid — if not outstanding — return on investment, supporting rapid development of one of the group’s key strategic pillars, and all with a relatively high degree of visibility,” added Andrew Wade, equity analyst at Jefferies.
The deal also comes with store closures and job losses.
Up to 300 employees working across the labels’ design, retail partnerships and buying departments will transfer to Asos, according to Deloitte. The acquisition risks the loss of thousands of jobs at the brands’ approximately 70 physical stores across the U.K.
“It’s disappointing and somewhat short-sighted that they are not keeping any of the brand stores. They should have maintained some sort of store presence at least from a brand awareness, omnichannel perspective and for the sake of our high street. But this way, they won’t be taking on any of those debts and could always rebuild store infrastructure at a later date,” noted Guy Elliott, senior vice president, retail and retail analyst at consultancy Publicis Sapient.
Arcadia filed for bankruptcy at the close of 2020, and Deloitte quickly sold off one if its brands, Evans, to Australia’s City Chic Collective for 23 million pounds.
The sale of Topshop, Topman, Miss Selfridge and HIIT to Asos leaves Burton, Dorothy Perkins and Wallis as the remaining labels still in need of a buyer. Boohoo, which purchased Debenhams last month, has confirmed it’s in exclusive talks to purchase those brands, with a deal that could come as early as this week.
The Asos/Topshop tie-up is the second major deal set to transform the British high street after Boohoo bought Debenhams.
Online players like Asos and Boohoo have seen dramatic rises in revenues in the last year, as a result of the pandemic and prolonged store closures — despite ongoing criticism about their unsustainable business models and lack of transparency when it comes to workers’ rights.
“Even once lockdown measures are eased, the ease of e-commerce will keep many shoppers online and out of stores. All of this means that Asos and Boohoo are in strong financial positions, currently and certainly in the future, to consider acquisitions. We could see these two retail titans reshaping online retail via their sprawling digital marketplaces,” said Chris Elliott, head of market insights at Edge by Ascential.
This story was reported by WWD and originally appeared on WWD.com.
