ASOS, the renowned online fashion retailer, recently made an official announcement regarding its acquisition of the Topshop, Topman, Miss Selfridge, and HIIT brands. Although there was no mention of the fate of the physical stores, ASOS did express its ambitious plans for global expansion. The company revealed that these brands witnessed remarkable sales growth on its platform in recent times.

The 2021 fiscal year saw a staggering 41% growth for these brands on ASOS, indicating that ASOS recognizes their potential. What adds to their appeal is their existing presence in the UK, US, and German markets, which aligns with ASOS’s brand portfolio and provides customers with a broader range of choices.

However, this acquisition does come with its fair share of challenges. It is anticipated that there will be store closures and significant job losses. Over the past 52 weeks, Topshop, Topman, and Miss Selfridge collectively suffered an unaudited EBITDA loss of £1.8 million across all channels. HIIT, a sub-brand of Burton which ASOS is not acquiring, has less readily available profitability data, but it is estimated to have incurred a loss of approximately £0.4 million across all channels. Nevertheless, under the new setup and without the burden of physical stores, these brands have the potential to become profitable once again.

ASOS has outlined a clear plan to leverage its market-leading capabilities to drive global growth and accelerate its ASOS Brands strategy. This acquisition is expected to expedite the company’s US strategy, primarily through its partnership with Nordstrom. ASOS stated that the financial prospects of this transaction are attractive. In 2019, prior to the Covid pandemic, these brands collectively generated total revenues of around £1 billion across all channels. Despite the challenges faced in the past year, they managed to continue growing through online and retail partnership channels, with total revenues reaching approximately £265 million in 2020. Sales via retail partners grew by 16% and online sales by 5%. Furthermore, their growth on ASOS itself exceeded 40% in the most recent period.

So, what’s the plan moving forward? ASOS intends to capitalize on its design, buying, and marketing capabilities to strengthen these brands and enhance their digital experience by integrating them into the ASOS platform. Additionally, ASOS will leverage its global warehouse and technology infrastructure. However, only a limited number of employees – specifically, around 300 individuals in design, buying, and retail partnerships – will be transitioning to ASOS.

CEO Nick Beighton expressed his enthusiasm for this significant milestone, stating that the acquired brands will join ASOS’s Venture Brands portfolio, alongside others such as Collusion, AsYou, and Reclaimed Vintage. He emphasized that the company will preserve the established brand and customer positioning of these labels, differentiating them from ASOS Design and other ASOS Brands. This move will increase the variety of customer styles, hero products, and price points offered across ASOS Brands.

ASOS also plans to further internationalize these brands. Previous attempts to expand Topshop through physical stores under its previous ownership encountered challenges and ultimately led to a retreat from most international territories. Nevertheless, with ASOS’s international warehouse infrastructure and localized online experiences, the brands are expected to experience continued growth through the ASOS platform. Moreover, strategic retail partnerships, particularly with Nordstrom, present opportunities to expand the reach of these brands and accelerate ASOS’s US strategy.

ASOS funded the acquisition entirely through its cash reserves, although initial investment costs are likely to offset any additional profits generated by these brands. ASOS’s purchase of these Arcadia brands demonstrates its commitment to strengthening its brand portfolio and expanding its global presence, thereby offering customers worldwide increased choices and opportunities.

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