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Boohoo is on the fast track to premium with Karen Millen buyout

Karen Millen


Boohoo is on the fast track to premium with Karen Millen buyout


Boohoo has been busy carving out a position for itself as the undisputed queen of fast fashion.

While rivals struggle to keep up the pace, bogged down by operational issues and stagnating profits, the Boohoo Group has cracked on with its ambition to create a “scalable multi-brand platform”, serving 13 million active global customers.

Over the past three years the group has steadily added to its glitzy stable of brands. In December 2016, the business paid £3.3m for a controlling share in Pretty Little Thing, the fast-fashion womenswear label set up by the sons of Boohoo co-founder Mahmud Kamani.

Then in February 2017, Boohoo splashed out £16m for US womenswear retailer Nasty Gal, and in March this year paid an undisclosed sum for the brand and intellectual property assets of online rival MissPap.

Boohoo describes its group as being “united by a shared customer value proposition” and an ambition to lead the online market for 16- to 30-year olds. With group revenue up 39% to £254.3m during the three months to 31 May, it’s fair to say the company has hit on a formula that works.

With the acquisition of Karen Millen, Boohoo has bought itself an instant route into the lives of premium fashion shoppers.

Not content with claiming a hefty share of the Gen Z market, though, Boohoo took its sending spree up a gear yesterday (6 August) with the £18.2m acquisition of premium British brands Karen Millen and Coast.

Boohoo has bought the online business and all associated intellectual property rights of both businesses, taking them out of administration. The group is apparently not interested in Karen Millen’s 32 UK high street stores and 177 concessions, putting 1,100 jobs at risk. We know already there will be 62 immediate redundancies.

However, the online business of both brands, which in the year to February 2019 generated £28.4m in sales, are considered by Boohoo to be “highly complementary additions” that will extend the group’s ambition “to lead the fashion ecommerce market globally.”

While the acquisition of Coast feels like a bit of an afterthought, the deal to bring Karen Millen on board is a shrewd move from Boohoo.

Firstly, the fast-fashion mega-group has given itself a fast track into the world of premium fashion. Karen Millen is an aspirational brand famed for its luxe fabrics and sophisticated cuts aimed squarely at the 25-plus age bracket.

Karen Millen’s summer 2019 collection.

Ranging from cropped knitted cardigans at £65 to sequin lace dresses selling for £399, Karen Millen is a world away from the £4 jersey skirts and £35 faux leather jackets selling on Boohoo. Even the prices for the Boohoo Premium range top out at £90 for a hand embellished bodycon dress.

Therefore, with this acquisition Boohoo has bought itself an instant route into the lives of premium fashion shoppers.

It is also worth noting that this is an international consumer base, given half of Karen Millen’s sales (50.2%) come from outside the UK. Looking beyond the domestic market is central to Boohoo’s strategy, an approach which makes sense given the company’s international group revenues rose by 56% in the three months to 31 May.

Focusing solely on the digital business is another clever move. Karen Millen’s latest accounts from February 2018 reported its digital business had grown “significantly” year on year, thanks to investment in the desktop and mobile sites.

In the same report, Karen Millen identified changing fashion trends and the potential these have to lead to reduced revenues, lower margins and excess inventory as the “principal risk” faced by the business.

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Here Boohoo might be able to help. The fast-fashion giant has a formidable supply chain that takes its product from trend to website at lightning fast pace. The ability to leverage the efficiencies of Boohoo’s supply chain could help Karen Millen inject more of a trend focus to its products, without losing its signature premium style.

In fact, there will be no need for Karen Millen to ditch its sophisticated silhouettes for neon crop tops. Boohoo encourages its brands to operate via standalone websites and maintain their own design identities, so as not to cannibalise the wider group. Nasty Gal, for example, still retains its relaxed US West Coast vibe compared to the slinky sex appeal of Pretty Little Thing.

Karen Millen’s design aesthetic already has the flavour of a Boohoo customer grown up, focusing as it does on flattering figure-hugging dresses and slim fit knitwear, giving the fast-fashion shopper a brand they can aspire to.

Mismatched acquisition

It has been a busy week for acquisitions, with Sports Direct confirming on Monday it was acquiring Jack Wills for £12.75m. Yet, while the Boohoo and Karen Millen deal makes strategic sense, Sports Direct’s feels like anything but a natural fit.

Once considered a rival to US companies Abercrombie & Fitch and Hollister, Jack Wills’ fortunes waned as the trend for preppy fashion slowly died. That being said, it arguably still cheapens the brand to be associated with Sports Direct, especially at such a turbulent time in the company’s history.

After the shambolic delay to its latest results due to an unexpected €674m (£605m) tax bill from the Belgian authorities, Sports Direct’s chief executive Mike Ashley sensationally claimed he regretted splashing out £90m to save House of Fraser from administration in 2018 and described the problems in the business as “nothing short of terminal”.

Whereas Boohoo specialises in fast-turnaround fashion built on tight supply chains that will complement the Karen Millen model, Sports Direct has built a diverse portfolio that includes everything from Games Digital to Evans Cycles and These businesses offer no clear synergies with the Jack Wills business or each other.

Furthermore, Ashley’s plans to revitalise Jack Wills are unclear. There is no word yet on the fate of the 1,700 staff working in the retailer’s 100 UK stores and six franchises worldwide. Jack Wills is, however, destined to become part of a new division within Sports Direct, which intends to expand into “buying and building” fashion and sports brands. So far, so vague.

The advantage for Karen Millen is that its new owner has a depth of working capital, clear ambitions for the future and a proven track record in the sector. That’s a brand match, but sadly the same can’t be said for Jack Wills.


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