British online clothing retailer ASOS on Monday bought brands including Topshop from collapsed Arcadia but has snubbed its UK stores, resulting in around 2,500 job losses.
ASOS, which has enjoyed strong demand during the pandemic, also acquired the Topman, Miss Selfridge and HIIT brands in a deal worth ?330 million ($452 million, 372 million euros), administrator Deloitte said in a statement.
Arcadia and UK department store chain Debenhams collapsed in December — having struggled to transition from bricks-and-mortar businesses long before the coronavirus pandemic forced shoppers online.
Debenhams’ disappearance caused 12,000 job losses, while a further 10,500 roles at Arcadia could be lost if as expected no one bids for its stores.
Following news of the 2,500 Arcadia jobs disappearing, retail trade union Usdaw called on the British government to help support the UK’s main shopping streets, which are under increasing threat from online retailers such as US giant Amazon.
“Retail is crucial to our town and city centres, it employs around three million people across the UK,” Usdaw National Officer Dave Gill said in a statement.
“The Government must take this seriously. We need a recovery plan to get the industry back on its feet.”
Arcadia’s collapse has capped a spectacular fall from grace for owner Philip Green.
Once dubbed “the king of the high street”, Green’s reputation had already been severely damaged by the demise of his British department store chain BHS in 2016.
“After much speculation, ASOS has won the prized assets from the fallen kingdom of Arcadia,” remarked Russ Mould, investment director at stockbroker AJ Bell.
“This looks like a decent deal and one that gives ASOS the ability to earn higher margins from clothes that it was already selling through its platform under a previous partnership deal.”
Monday’s announcement comes with another online clothing retailer, Boohoo, in talks to buy Arcadia brands Dorothy Perkins, Wallis and Burton.
Boohoo is not expected to snap up around 370 stores that share the brands’ names, however.
Boohoo has already agreed to purchase the Debenhams’ brand, while ASOS on Monday said its deal did not include the 70 Arcadia stores that are attached to the brands it is purchasing.
Those outlets will therefore close, resulting in around 2,500 job cuts.
“It means the high street is left with even more vacant stores, and names strong enough to keep standing, such as Zara and H&M, are left in an even stronger position,” Mould said.
ASOS is paying ?265 million for the four brands, plus ?65 million for remaining clothing stock.
Britain’s retail landscape has been dramatically redrawn by pandemic lockdowns that have increasingly forced consumers to shop online from the safety of their own homes.
That has handed a major boost to online businesses which are not burdened by the cost of physical high-street stores — enabling ASOS and others to expand rapidly.
“Online retailers… are certainly taking advantage of the current challenging operating environment for physical retailers (to) take the opportunity to broaden their portfolios,” noted analyst Maria Bogdanova at research consultancy Euromonitor International.
Usdaw noted that the UK saw almost 180,000 retail job losses and around 20,000 store closures last year.
“Each one of those job losses is a personal tragedy for the individual worker and store closures are scarring our high streets and communities,” Gill added.
ASOS said the “iconic” Arcadia brands it is gaining would “resonate” with its youthful customer base.
“This acquisition represents a compelling strategic opportunity in support of our mission to become the number one destination for fashion loving 20-somethings worldwide,” it said.