Online retailer Boohoo swoops on high street icon Karen Millen

Karen Millen

The changing face of British retailing will be underlined on Tuesday, when Boohoo Group, the wildly successful online-only fashion business, swoops to buy Karen Millen, one of the high street’s best-known names.

It is understood that Boohoo, which owns a controlling stake in PrettyLittleThing, is in advanced talks to buy Karen Millen and sister brand Coast through an insolvency process known as a pre-pack administration.

A transaction had yet to be signed late on Monday evening, and people close to the process warned that it could yet be abandoned.

However, a deal is expected to be concluded following the appointment of Deloitte as administrator to Karen Millen.

If completed, it would come after a six-week sale process in which the retailer’s management and advisers attempted to strike a solvent sale.

Sources said on Monday night that the brutal conditions in Britain’s retail industry had made a pre-pack deal – through which some of the company’s financial liabilities are left behind – unavoidable.

AIM-listed Boohoo’s acquisition of Karen Millen and Coast secures a potentially bright future for the two women’s fashion brands.

The company owns brands including its own boohoo label, Nasty Gal and MissPap.

The purchase of Coast and Karen Millen, however, by an online-only retailer will cast doubt about the future of hundreds of retail jobs at a time when tens of thousands more are facing the axe.

Together, Karen Millen and Coast employ approximately 1100 people, trading from more than 30 standalone stores and 175 concessions in the UK.

One retail analyst said on Monday that it was “inevitable” that the stores would face closure with the loss of most of the company’s workforce.

Such an outcome would inflict further pain on stakeholders throughout the retail sector, including high street landlords who in recent months have been forced to accept steep rent cuts at some of the sector’s biggest names.

Sir Philip Green’s Arcadia Group, the owner of Top Shop, Debenhams and Monsoon Accessorize have turned to creditors to strike compromises on store closures and rent reductions in a desperate survival bid.

Karen Millen, which was founded by the eponymous entrepreneur more than 30 years ago, will become the latest in a series of big fashion names to be forced into insolvency.

Also revealed is that the tycoon Mike Ashley’s Sports Direct International would buy Jack Wills through a pre-pack process.

The deal, which cost Mr Ashley’s company less than £13m, was confirmed on Monday.

Earlier this year, LK Bennett, founded by the businesswoman Linda Bennett, was sold to its Chinese franchisee following several weeks in administration.

Karen Millen and Coast are being sold by Kaupthing, one of the ‎Icelandic banks that collapsed during the 2008 financial crisis.

One of the most prominent fashion brands in the UK, Karen Millen has a surprisingly large international footprint with a presence in about 50 international markets, including Australia, France, Spain and the US.

The company, which snapped up the Coast brand from administrators last year, recorded sales of £162m in the year to February 2018, up from £158.8m the year before.

It recorded an operating loss of £1.4m last year – an improvement on the prior year’s performance.

The retailer is run by Beth Butterwick, a former‎ executive at Bonmarche, and chaired by Neil McCausland, who has held directorships at retailers such as Kurt Geiger and Snow and Rock.

The founder of the Karen Millen brand‎ is no longer involved with the business, which was founded during the 1980s.

Ms Millen captured a growing share of a market focused on designer-lookalike fashions, riding a wave with her business partner and eventually selling out to Oasis in 2004 for close to £100m.

She was regarded as one of the most talented fashion retailers of her generation.

Further changes of the business bearing her name ensued, ‎but Ms Millen was declared bankrupt in 2017 following heavy losses connected to the failure of Kaupthing more than a decade ago.

She also ‎fought a legal battle to regain the right to use her name on new clothing designs.

Karen Millen’s Icelandic owner also counts the Oasis and Warehouse brands among its assets, although these are not part of the pre-pack sale to Boohoo.

The AIM-listed retailer’s purchase of Karen Millen and Coast will reinforce both the residual appeal of those brands and also the shifting balance of power in a retail industry beset by structural change.

Boohoo, which was set up in 2006 by Mahmud Kamani and Carol Kane, now has a market value of £2.6bn, making it two-thirds the size of Marks & Spencer.

Spokespeople for Boohoo, Karen Millen and Deloitte all declined to comment.