British fast-fashion retailer Asos’ acquisition of British high-street retailer Topshop, announced Monday, was made possible by its excellent year: It saw sales growth of more than 10% per quarter over 2020, thanks to the surge in e-commerce sales and its quick pivot to at-home comfort wear. The company had a surplus of cash that allowed it to cover the entire $400 million price tag with cash.
It’s part of the Asos’ goal of continuing the growth it saw over 2020 on the international level. Topshop was a draw for its strong presence outside the U.K. — about half of Topshop’s 2020 sales coming from outside the U.K., primarily the U.S. and Germany. In the six years from 2014-2020, Asos quadrupled its revenue from outside of the U.K.
While Topshop’s previous parent company, Arcadia, was suffering, sales of Topshop products have been relatively strong. A representative from Asos said that sales of Topshop products, which have been sold on Asos’ online store for the last year, grew 41% in the first quarter of Asos’ fiscal 2021, ending Jan. 2021. Asos ended 2020 with more than $4 billion in revenue.
“We have been central to driving [Topshop’s] 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 around the world,” said Asos’ CEO Nick Breighton, in an emailed statement to Glossy.
The deal to purchase Topshop does not include any of Topshop’s 70 physical stores located throughout Europe, which will all be sold off, and Asos plans to turn Topshop into a primarily online brand. Asos wants to use the Topshop to help fill out its own catalog, bringing in new customers attracted by the name recognition while shedding some of Topshop’s baggage like unprofitable stores.
“We will retain their established brand and customer positioning, which is differentiated from our core Asos Design and other Asos brands,” Asos said in a written statement, in regard to its plans for Topshop. “This enhances our ability to increase choice for customers, offering different customer styles, hero products and price points across our Asos brands.”
“It shows the continual growth of e-commerce that these brands can now make such huge acquisitions,” said Joe McCarthy, director of performance marketing at e-commerce company Klaviyo. “That Asos could complete this deal in cash is remarkable. It shows that the e-commerce market is growing significantly.”
Asos’ acquisition and subsequent plans call to mind recent moves by its biggest competitor, fellow British fast-fashion brand Boohoo. British also acquired a British retailer when it bought Debenhams last week. It’s shedding Debenhams’ brick-and-mortar fleet and will turn it into an online-only brand.
Where the two companies differ most is on geography. Asos’ U.K. sales dropped by 2% in 2020, while Boohoo’s rose by 30%. A representative from Asos said that Topshop’s global appeal outside the U.K. was a major reason for Asos’ interest in acquiring it. (The brand still has a presence at U.S. and international retailers like Nordstrom and Yoox, even though its U.S. stores have closed.) Debenhams, on the other hand, is a primarily U.K. business, and Boohoo will likely keep it that way. It noted Debenhams’ status within the U.K. as a reason for acquiring it in its announcement. Debenhams has only a handful of stores outside the U.K., primarily in Denmark, and little name recognition in the U.S.