Has boohoo made a boo-boo with Karen Millen, Coast deal?
Karen Millen and Coast are an unlikely fit for the fast fashion-focused boohoo, argues GlobalData.
It emerged yesterday that the pureplay had bought the online business of UK brands Karen Millen and Coast for £18.2 million. It said that the deal "would represent highly complementary additions". The firms' 32 UK High Street stores and 177 concessions, employing 1,100 people, now appear set to close.
This is a far cry from boohoo’s previous acquisitions of MissPap and Nasty Gal which both operate in the area of the market it specialises in – fast fashion for 16-24 year olds, observes Emily Salter, Retail Analyst at GlobalData.
Karen Millen and Coast, however, have strong reputations for quality occasionwear, targeting a core demographic of 25-45 year old shoppers. This contrasts to boohoo’s focus on selling a high volume of product quickly, offering frequent promotions, and using social media as an important marketing method. The brands would fit better into Phillip Day’s portfolio due to the similar target demographic and High Street presence of the brands, Salter believes.
“Although Coast now only has a physical presence in the form of concessions, the loss of this will be detrimental to sales. Stores are important for Coast and Karen Millen due to the higher value of products, so operating as an online pureplay is likely to significantly increase return rates. The closure of concessions will also be another blow to embattled department stores, in particular Debenhams and House of Fraser,” she comments.
“As Coast and Karen Millen are well-established brands, boohoo is likely to find it hard to generate rapid revenue growth, in contrast to the impressive growth of PrettyLittleThing and Nasty Gal which were acquired as small, relatively unknown brands. The group excels at marketing, especially on social media to generate awareness and a buzz around its brands, so should use this strategy to inject renewed life into Coast and Karen Millen,” Salter concludes.