With the news that the fast-fashion e-commerce group boohoo will acquire Karen Millen and Coast, amid falling sales on UK highstreets, the British retail sector is experiencing a painful week.

The online fashion group, which specialises in extremely value-focused apparel, announced that it would buy the online businesses and associated IP rights of ailing high street brands Karen Millen and sub-brand Coast for £18.2 million, on the same day that both entered into administration, an announcement on boohoo’s website read. The business had been up for sale by the owner, Iceland’s Kaupthing bank, since June.

“The Group believes that the online business of these brands are highly complementary additions to its scalable multi-brand platform and their acquisition extends the Group's offer as part of its vision to lead the fashion e-commerce market globally”, it continued.

There are concerns about the impact that the acquisition will have on the brands’ more than 1,100 staff working across the London head office and 32 retail stores, but the outlook is grim – it’s next to impossible that there could be separate ownership of the same brands’ online and physical presences.

In comments reported by Drapers, Deloitte administrators said that “while the online business will continue, Karen Millen and Coast will continue to trade in store for a short time whilst the administrators realise the other assets of the companies.

“As we continue to see, the retail trading environment in the UK remains extremely challenging.”

Karen Millen has been struggling for the past few years. In 2018, the company lost £5.7 million; in 2017, it lost £11.9m.

Conversely, boohoo group reflects a different story of e-commerce growth, but also of speed to market: it sells exclusively own-brand items and holds extremely small amounts of inventory at any one time. According to a Guardian article around the time of boohoo’s 2014 IPO, the company said it buys just 300-500 pieces at a time with one in four orders repeated. In 2017, it acquired three more brands targeted at the 16-24 market. Karen Millen and Coast will presumably open up a new consumer segment for the company. Whether boohoo’s social media-heavy marketing formula will translate is another question.

The news comes as figures from the British Retail Consortium (with KPMG) show that retail sales in July slowed to the lowest rate on record: just 0.3% growth. Department stores – at which Karen Millen and Coast operate as many as 177 concessions – were among the worst areas of the sector.

Meanwhile, consumer habits in other areas of retail are forcing big changes. Tesco announced this week that it would be cutting as many as 4,500 jobs in its 175 medium-sized Metro inner-city stores.

“The Metro format was originally designed for larger, weekly shops, but today nearly 70 per cent of customers use them as convenience stores, buying food for that day”, the company said in a statement reported by the FT.  

The British retail market is getting much tougher in light of several macro factors, noted Barclaycard, whose own figures based on credit and debit card transactions also showed weak spending growth of 1.7% in July.

“Spending has remained relatively subdued over the past few months, with an underlying uncertainty about the wider economic and political landscape causing many to hold off making purchases on bigger ticket items”, said Esme Harwood, Director at Barclaycard, in a statement.

Sourced from boohoo group, Drapers, The Guardian, Financial Times, Barclaycard; additional content by WARC staff