Asos Plc is looking as squeezed as one of its bustier dresses.
Selling Topshop Would Be a Fashion Fix for Asos
But there is a solution to its tight fit: Sell Topshop, the storied fashion brand it bought two years ago from the ruins of Arcadia, Philip Green’s retail empire that collapsed into administration in late 2020.
If Asos could achieve a similar price to what it paid — about £300 million ($364 million) — it would bolster the balance sheet. It recently renegotiated the terms of a £350 million revolving credit facility, with tests of its financial strength suspended until next year. The facility matures in 2024, so Asos will need to refinance this year. Bloomberg News reported recently that the company was discussing whether to add restructuring expertise to its finance team.
But there are other reasons why Asos should consider offloading Topshop.
The retailer was founded in the 1960s, but it was only in the late 1990s and noughties that it became a fashion force, teaming up with supermodel Kate Moss to produce a collection that drew large crowds to its once iconic store on London’s Oxford Street. Then, in the years before Arcadia’s collapse, it struggled to regain its fashion spark amid competition from Asos itself, as well as other rivals such as Boohoo Group Plc and Associated British Foods Plc’s Primark.
Joining the Asos stable promised a fresh start. But today the brand — which no longer has any UK stores — is still searching for that old magic.
It was relaunched last autumn with the first designs created entirely under Asos’s ownership. Its new parent established a dedicated digital storefront for the brand on its website, as well as a new monogram. Yet Topshop still lacks visibility, particularly among those older customers who grew up with it but may not be regular Asos shoppers. The name is not being marketed as effectively as other Arcadia brands bought by Boohoo, such as Dorothy Perkins.
Asos recognizes the shortcomings. New Chief Executive Officer Jose Antonio Ramos Calamonte is reviewing the way Asos reaches its customers, which could give Topshop’s marketing more clout. But there is a strong argument for the name returning to the British high street.
In its heyday, part of Topshop’s appeal was getting to browse its stores for skinny jeans, fake fur coats and floral dresses. These days, consumers are rediscovering an appetite for in-person purchasing. And Topshop can still be found in 100 Nordstrom locations in the US and Canada, thanks to a deal last year whereby the department store took a minority stake in Asos’s former Arcadia brands.
Yet as Asos grapples with a surfeit of stock, a potential cash outflow and recruiting a finance director, it lacks the financial and management bandwidth to add a physical presence.
Of course, that litany of problems means Asos would be selling from a position of weakness. There would also be an opportunity cost to letting Topshop go now.
Despite its lower profile, Topshop has been leading much of Asos’s growth, with sales up 105% in the year to August 2022 and a 200% gain in the US. The company said Topshop jeans were now the leading womenswear jeans on its site, while the label’s dresses had also been popular. The brand may just need a few more years to to meet its full potential within its new home.
Then there is the question of who would be a buyer this time around.
Clothing company Next Plc looked at Topshop two years ago, but it has struck a series of deals since then, including taking stakes in Reiss and Joules and snapping up the Made.com brand.
Frasers Group Plc founder Mike Ashley could be interested after initially missing out on Topshop. The sportswear retailer has taken a stake of about 5% in Asos and has acquired online retailers Missguided and I Saw It First. Marks & Spencer Group Plc, meanwhile, is also building its credibility in fashion, having acquired Jaeger just weeks before Asos’s Topshop deal. Adding the brand could help it reach a new, younger audience, as well as their moms who remember the Kate Moss era. Chinese fast-fashion retailer Shein may also be interested. And don’t rule out private equity.
So despite the drawbacks, exploring the future of Topshop has merit.
When it was relaunched last autumn, Asos described this as a “new chapter.” Perhaps that should be steered by someone else.
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–With assistance from Elaine He.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.
More stories like this are available on bloomberg.com/opinion