Where is £55m in Value in the Debenham's Brand?

[mattk]

Boohoo has reportedly paid £55m for the Debenham's brand and website, while the stores are to close.

https://www.theguardian.com/busines...close-stores-job-losses-boohoo-shops-covid-19

Where is £55m of value in the Debenham's brand?

 

[ImranR]

It's only worth what someone is willing to pay...

 

[MBE2017]

Websites can cost a lot, plenty of threads on the forum regarding this.

 

[WaveJumper]

Boohoo obviously see that value in acquiring the brands and associated intellectual property rights as a good deal for them and well worth the money. I am sure it will give them a big foot in the door to the beauty and homeware customer base Debenhams have.Boohoo’s said aim is to build a huge online marketplace and don’t forget they swept up Oasis, Coast and Karen Millen not so long ago.

 

[Aniela]

Boohoo has reportedly paid £55m for the Debenham's brand and website, while the stores are to close.

https://www.theguardian.com/busines...close-stores-job-losses-boohoo-shops-covid-19

Where is £55m of value in the Debenham's brand?

For a fashion brand buying it, I'd saying £55 million is actually a bargain, relatively speaking.

The article states "...the Debenhams website receives 300m visits a year, making it a top 10 retail website in the UK by traffic."

Not all of that is clothing related traffic but regardless, having access to that alone, is worth a staggering sum.

I could see why a clothing brand would see value in accessing 300 million visitors a year, in which they can promote their clothing ranges.

On top of that, there's massive value in purely acquiring a competitor, having control of where your products are sold etc. That's worth a lot.

 

[Paul Norman]

I would need to see the information in more detail.

The Debenham's brand, without seeing that, seems a little dated to me. But it may be that BooHoo are interested in exactly that - getting that customer into their business. I am not massively convinced by my own argument there!

Personally, right now, with where retail is (including online unless your name is Mr Bezos), I would take some convincing.

 

[Maxwell83]

Personally, right now, with where retail is (including online unless your name is Mr Bezos), I would take some convincing.

Then now is exactly the time to acquire IP/goodwill assets - while everyone else is cautious and the assets are cheap.

Boohoo probably have a 5/10/20 year plan. They know that online retail is not going to die a permanent death, especially not for clothes. It may just hibernate for a while.

 

[Financial-Modeller]

Where is £55m of value in the Debenham's brand?

I guess questions that any competitor would ask are:

1. how much is the cost of acquisition of the customer database of Debenhams? and
2. how much would the cost of acquisition of the same customer base be if a competitor buys it?

A little out of date, but this suggests that the customer base is skewed towards AB demographic.

https://www.statista.com/statistics...e-by-demographic-group-united-kingdom-survey/

This may be a group that Boohoo has limited access to / could complement its existing customer base etc

 

[Paul Carmen]

as @Financial-Modeller says, the value is in what they see adding value to their existing business; e.g. a different demographic and the data behind that.

On top of that, there is the potential value of the whole ecommerce setup; e.g. the platform, the ecommerce supply and distribution, the brands they own.

Plus there is the huge organic rankings both branded and unbranded if they continue to sell similar products on the website, a quick look has this at a value of this at £5-£10 million pa for organic terms alone.

 

[lesliedocherty]

What a foothold into cosmetics, instant access, then the relationships with these brands, I think the Boohoo guys are pretty shrewd dealers.

 

[AlanJ1]

Personally would say for the mailing list and domain traffic £55m is a steal.

 

[thetiger2015]

It's a bargain IMO.

How much would it cost to build the equivalent trust/digital assets right now?

They have distribution set up, they have a huge volume of web traffic, they have huge amounts of customer data which takes years to acquire. They have customer behaviour data and the brand has been established in the UK retail market for years.

Boohoo want to be the equivalent of Amazon, so they're diversifying by acquiring an asset that was strangled by debt and unusable high street retail space. They've got rid of the debt, they've cleared the retail space, they'll probably have additional warehouse space and just need to worry about integration.

 

[JEREMY HAWKE]

I brought two Debnams shirts and I looked like I had been to the jumble sale
Are you sure they paid 55mil and not 55 quid

 

[Mr D]

Plenty of people like the Debenham brand.
Gaining those customers for the business? Worth money.
Short term it may not be worth much - next year, next decade .... Could be worth quite a bit.
The buyer presumably has done the in depth investigation into what the brand is worth to them - and it's viable.

Plus the PR aspect. And staff loyalty - save someone's job and maybe they will be a good worker....

 

[Mr D]

It's a bargain IMO.

How much would it cost to build the equivalent trust/digital assets right now?

They have distribution set up, they have a huge volume of web traffic, they have huge amounts of customer data which takes years to acquire. They have customer behaviour data and the brand has been established in the UK retail market for years.

Boohoo want to be the equivalent of Amazon, so they're diversifying by acquiring an asset that was strangled by debt and unusable high street retail space. They've got rid of the debt, they've cleared the retail space, they'll probably have additional warehouse space and just need to worry about integration.

Give it 12 months and likely to see the benefits. Perhaps considerable benefits.

As you say the stuff that was holding the brand back have been lost.

 

[Lucan Unlordly]

Mintel say that 43% of the over 65's have shopped more online since the start of the pandemic. That they are likely to be the major drivers of e-commerce growth in the short to medium term.
It follows that the Debenhams name and customer database will serve Boohoo well. Catch them now.

Although natural market forces are coming into play it's somewhat disconcerting that the older generation will be driving online sales that take away the jobs of 12,000 predominantly younger Debenhams employees with many more in fashion, cosmetics, clothing and general high street retail to follow.

 

[Ian J]

the Debenhams name and customer database will serve Boohoo well. Catch them now.

The £55m will probably just about cover the Administrators fees too

 

[Highland Spring]

The brand is very well known and I am sure their website had millions of visitors, its just their shops were too expensive compared to their level of sales. Ecommerce sites have low costs and Boohoo already has the infrastructure it needs to "bolt on" Debenhams, looks like a great deal for me.

 

[Mark T Jones]

W hope that BooHoo have done their due diligence and have established the value in brand/tech/customer demographic.

It isn't totally unknown for cash-rich tech companies to go on silly vanity buying sprees.

 

[Bob Morgan]

Where is £55m of value in the Debenham's brand?

A couple of yachts?

 

[Jasondb]

In the High Street 85% of my purchases tended to be either M&S or Debenhams, I'm in my 50's now and not that bothered about the latest trend more quality, fit and comfort.

Debenhams was not just clothes, it also sold a lot of kitchen and bathroom consumer durables.

From a customer POV disappointed it's presence will be gone from the High Street.

 

[The Byre]

It isn't totally unknown for cash-rich tech companies to go on silly vanity buying sprees.

I think they have bought themselves a millstone. It was the only shop I looked at in 2019 that ten days before Christmas was totally empty!

And every piece of clothing in the place was dreadful and beige. No funky music playing. No showmanship in the display. No shopping experience. No design. No colour. No flare! Dead!

Yes, their core demographic was elderly ABs. But for £55m they could have created a functioning online presence that reached that and younger customers. The so-called elderly is not some gibbering old Minny looking for something in beige whilst listening to Vera Lynne songs.

The bad news is that old people die - and you can't sell many beige cord trousers to dead people.

 

[Mark T Jones]

I think they have bought themselves a millstone. It was the only shop I looked at in 2019 that ten days before Christmas was totally empty!

And every piece of clothing in the place was dreadful and beige. No funky music playing. No showmanship in the display. No shopping experience. No design. No colour. No flare! Dead!

Yes, their core demographic was elderly ABs. But for £55m they could have created a functioning online presence that reached that and younger customers. The so-called elderly is not some gibbering old Minny looking for something in beige whilst listening to Vera Lynne songs.

The bad news is that old people die - and you can't sell many beige cord trousers to dead people.

I'm kind of assuming the value is in the tech and the data rather than in the stock.

However, like you, last time I visited them (Guildford, Christmas 2018) I did wonder what they actually we're

 

[thetiger2015]

I think they have bought themselves a millstone. It was the only shop I looked at in 2019 that ten days before Christmas was totally empty!

They're not interested in Debenhams in the current format, it's the tech, the distribution, the databases and any 'own brands' that are controlled by Debenhams. £55 million to Boohoo is pocket money for all of that stuff (They do over £1 billion in sales per year).

They bought Pretty Little Thing for £329 million: https://www.standard.co.uk/business...bid-to-end-conflict-of-interest-a4452701.html

Acquisitions is part of their new drive for quick growth.

 

[The Byre]

Acquisitions is part of their new drive for quick growth.

They are also a great way to dilute and/or destabilise the parent company.

 

[mattk]

They are also a great way to dilute and/or destabilise the parent company.

It would be interesting to see how many mergers and acquisitions eventually results in a huge write-off of value a few years later.

I agree with your comment about millstone. I don't think Debenhams holds any value. Their brands are tired, their website looks like a vanilla out-the-box e-commerce site and having worked for a couple of large retailers, their backend systems and processes are fit for the bin, not something you'd want to takeover.

 

[Paul Evans- BuyerBiz]

It would be interesting to see where that valuation has come from given they will be selling of a large chunk of stock

 

[Mark T Jones]

It would be interesting to see how many mergers and acquisitions eventually results in a huge write-off of value a few years later.
.

I don't know the stats, but I do know that any company with a 'war chest' for acquisitions will become increasingly bizarre in their decisions. Throw in ego for an extra layer of fantasy

My favourite was the late '80s to early 90s when 'diversified conglimerates' were a thing. Basically an excuse to buy a whole load of unrelated businesses with no discernable rationale. Some managed to offload the rubbish and return to core business. Most just failed

One of the biggest bought Rediffusion for millions, just because they wanted the red star logo.

 

[thetiger2015]

They are also a great way to dilute and/or destabilise the parent company.

Maybe...although The Hut Group have been successful at buying up unrelated brands and getting rid of a lot of the running cost by bringing everything in-house. They've got MyProtein, Coggles, ESPA, Allsole....different audiences.

Boohoo have got a considerable amount of money available and investor backing from what I can see. Investors want things to happen, anything to happen, sell something, buy something, they like to see money flowing. They don't want people sitting on it or slowly easing money in to organically grown things. That's no fun.

Any company I've been involved with that have used outside investment, have always been focused on high sales volume, market share and acquisitions. Profit...not bothered really, it's just sat in the bank or getting taxed away. They'd rather that got splashed somewhere else, buy a competitor or something.

 

[The Byre]

Boohoo have got a considerable amount of money available and investor backing from what I can see. Investors want things to happen, anything to happen, sell something, buy something, they like to see money flowing. They don't want people sitting on it or slowly easing money in to organically grown things. That's no fun.

Then they'll never become the next Aldi, Lidl, National Panasonic, Bauer Media, BMW, Walmart, or Bosch.

I like slow and inexorable growth that cannot be attacked or destroyed easily. Debt-free or low debt growth. Organic growth that marches forward on feet of profit and equity.

In 1932, one Konosuke Matsushita gathered his workforce together and outlined the future of the company he founded in 1917 in the cellar of the block of flats where he lived. The company's future was set out in ten distinctive steps, each step to be completed in 25 years - a 250-year plan. He died in 1989 at the age of 94. The company plan was intact and running according to plan - and it still is.

I have two Technics record players, three Panasonic TV cameras and one Panasonic movie camera. Our phones are from Panasonic, as is my TV at home and the Blu-Ray player and projector in the film room. My first reel-to-reel audio mastering machine was from Technics because it was better and cheaper than a Studer or any other professional brand. I bought it in 1980 and it still is working today! Technics, National and Panasonic are Matsushita brands.

Long-term ALWAYS beats short-term, just as equity always beats debt.

 

[Ray272]

I'm sure boohoo got investigated for labour practices recently which muddied their rep. Buying Debenhams and all its supply chain may help show a change in ethics and appeal to investors. There are many other positives but that may be a big reason for the acquisition.