British online fashion retailer Boohoo.com is bidding $20 million for the brand and customer list of bankrupt U.S. clothing brand Nasty Gal. Despite strong early growth and popularity, venture capital-backed Nasty Gal has struggled in recent years. It had revenues of $77.1 million in the year to February 1, according to Boohoo, but made a loss of $21 million in the same financial year. It filed for bankruptcy protection in early November.
So, what - exactly - is Boohoo? The online retailer, which is based in Manchester, England, made headlines recently - aside from the Nasty Gal deal - as its shares have soared about 260 percent in 2016 as fashion-conscious youngsters snapped up garments such as bomber jackets and shoulder dresses for $18 apiece. The stock’s rise is the biggest of any western European consumer-related company with a market capitalization of more than $500 million, in a year when shares of many retailers are underperforming the broader market.
Boohoo draws inspiration from Zara’s industry-leading speed of design – then makes it even faster. After ordering a broad range of products in small quantities, over half of which are made in the U.K., the retailer puts them on sale and orders more of the ones that sell and stops buying those that don’t.
“Youngsters now will decide on Thursday what they want to wear on their Friday night out,” company Chairman Peter Williams said. “Our test-and-repeat model means we can put what they want in front of them very quickly and get it shipped out for the next day.”
Boohoo’s clothes and prices are targeted squarely at 16-to-24-year-olds. By only selling online rather than having to ship goods to stores, Boohoo can more quickly collect data on what products are hot and which are not. Lead times are between one and two weeks, more than twice as fast as Zara, according to Simon Bowler, an analyst at Exane BNP Paribas.
“This is taking the world-leading clothing model, and not only replicating it but improving it,” Bowler said by email. “In a week, they launch the number of ranges that other retailers would launch in a season.”
The model is the brainchild of co-founders and Chief Executive Officers Mahmud Kamani and Carol Kane. The fashion industry veterans have spent their respective careers supplying the likes of fast-fashion pioneer Primark and Sir Philip Green’s TopShop.
Boohoo’s stock price gain is all the more startling given it operates in a struggling industry. Typically, stellar performers such as Next Plc have suffered sales declines, while internationally H&M’s profits are down and American Apparel has filed for bankruptcy.
In addition to the success of its sourcing model, Boohoo’s stellar year hasn’t been derailed by the sharp fall in sterling since Britain voted to leave the European Union. As well as purchasing much of its garments in pounds, the company makes about a third of its total revenue overseas. On Wednesday, it announced plans to acquire the brand and customer databases of Nasty Gal Inc., the Los Angeles-based women’s fashion retailer that filed for bankruptcy protection last month.