Selling Topshop would be a fashion fix for Asos


Asos Plc looks as squeezed as one of its busty dresses.

The online retailer, which for years has generated sales growth the likes of which high street stores could only dream of, is now struggling with a drop in digital demand amid an impending refinancing. Asos faces a potential shareholder revolt at its annual meeting on Wednesday. A day later, it will report first quarter sales.

But there is a solution to its close association: sell Topshop, the famous 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 fetch a similar price to what it paid – around £300m ($364m) – it would strengthen the balance sheet. It recently renegotiated the terms of a £350m revolving credit facility, with tests of its financial strength suspended until next year. The facility matures in 2024, so Asos will have to refinance this year. Bloomberg News recently reported that the company is 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 wasn’t until the late 1990s and early 20th century that it became a fashion force, teaming up with supermodel Kate Moss to produce a collection that drew 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 Primark Associated British Foods Plc.

Joining the Asos stable promised a new beginning. But today the brand – which no longer has a UK store – is still looking for that old magic.

It was re-launched last autumn with the first design to be entirely owned by Asos. Its new parent has established a dedicated digital showcase for the brand on its website, as well as a new monogram. However, 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 marketed as effectively as other Arcadia brands acquired by Boohoo, such as Dorothy Perkins.

Asos recognizes the shortcomings. New chief executive Jose Antonio Ramos Calamonte is rethinking the way Asos reaches its customers, which could give Topshop’s marketing more leverage. But there is a strong case for bringing the name back to Britain’s high street.

In its heyday, part of Topshop’s appeal was looking for skinny jeans, faux fur coats and floral dresses in its stores. These days, consumers are rediscovering their appetite for personal shopping. And Topshop can still be found in 100 Nordstrom locations in the US and Canada, thanks to a deal last year that saw the department store take a minority stake in Asos’ former Arcadia brands.

Still, as Asos grapples with excess inventory, potential cash outflows and the hiring of a CFO, it lacks the financial and management bandwidth for an additional physical presence.

Of course, that litany of problems means that Asos would be selling from a position of weakness. There would also be an opportunity cost of firing Topshop now.

Despite its lower profile, Topshop led much of Asos’ growth, with sales up 105% in the year to August 2022 and up 200% in the US. The company said Topshop jeans were now the leading women’s jeans on its site, while the label’s dresses were also popular. It may take a few more years for the brand to reach its full potential in its new home.

Then the question arises who would be the buyer this time.

Clothing company Next Plc looked at Topshop two years ago but has since done a series of deals, including taking stakes in Reiss and Joules and acquiring the brand.

Frasers Group Plc founder Mike Ashley could be interested after initially missing out on Topshop. The sportswear retailer has taken a stake of around 5% in Asos and bought 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’ deal with Topshop. Adding the brand could help 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 its flaws, exploring the future of Topshop has merit.

When it relaunched last autumn, Asos described it as a “new chapter”. Maybe someone else should manage that.

More from Bloomberg Opinion:

• Retail Christmas gloom was overrated: Andrea Felsted

• When the successor and the backup don’t care about each other: Martin Ivens

• Outspoken CEO Dies Fast: Beth Kowitt

–With help from Elaine He.

This column does not necessarily reflect the opinion of the editorial team or of Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer goods and retail industry. She was previously a journalist for the Financial Times.

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