Asos to buy Topshop and other Arcadia brands for £265m

Asos confirmed on Monday that it will acquire Arcadia’s Topshop, Topman, Miss Selfridge and HIIT brands in a transaction that will recoup more than £300m for creditors of Philip Green’s insolvent group.

The online fashion retailer will pay £265m for the brands, plus £30m for existing inventory and will honour £35m of forward purchase orders.

About 300 of Arcadia’s approximately 13,000 employees will be transferred to Asos, mostly in design and product-related roles, but the transaction does not include the group’s 70 stores, including its Oxford Street Topshop flagship.

“It’s not our model to operate stores” said Asos chief executive Nick Beighton, who added that the company was looking at leasing the store “because the administrators asked us to” but that it was “not a key priority right now”.

The Topshop Oxford Street building is owned by an Arcadia subsidiary and has been pledged as security to the group’s pension scheme. It is at present being marketed for sale.

Asos is also not acquiring the main Topshop distribution centre in the East Midlands, an asset that estate agent Savills believes could be worth more than £50m.

Asos is already a leading sales channel for Arcadia brands, with half a million pairs of Topshop jeans and more than 300,000 Topman T-shirts sold in the past financial year. Sales through Asos have been growing faster than from Arcadia’s own ecommerce sites.

Mr Beighton said the first Topshop ranges produced under Asos ownership would appear “towards the back end of spring and summer and definitely into autumn and winter”.

He also said Asos would work with partners such as Nordstrom in the US, with which Topshop has a concession agreement, to accelerate international expansion.

Finance director Mat Dunn said there would be about £20m of “start-up” costs in the current financial year, which would cancel out any additional profit, but that the brands should generate a “double-digit” return on capital in the year to August 2022 as sales recovered.

Asos shares were up almost 7 per cent by early afternoon. Analysts at Citigroup said the transaction would add only about 6 per cent to sales in 2022 but would increase profit by a fifth through using existing infrastructure to improve margins at the acquired brands.

Topshop, once a jewel in Sir Philip’s fashion empire that was feted by supermodels and ran shows during London Fashion Week, was hit especially hard by the pandemic.

Although online revenue grew, it was still insufficient to offset sales lost while shops were shut during lockdown.

The company, already in a weak financial position after a complex restructuring in 2019, was put into administration along with the rest of Arcadia in November.

Another Arcadia brand, Evans, was sold to Australian retailer City Chic in December for £23m.  

Asos rival Boohoo is in discussions to buy the remaining Arcadia brands — Burton, Dorothy Perkins and Wallis — although the purchase price is likely to be lower and any agreement will also not include physical stores.