City Chic expands with UK acquisition
City Chic Collective rose over 11% on Monday after it advised that it entered into an agreement to acquire the Evans brand, eCommerce and wholesale businesses for £23.1 million in cash. Evans is a UK-based retailer of women’s plus-size clothing with a longstanding customer base and strong market position.
City Chic will acquire the Evans brand, intellectual property, customer base and inventory, which represents the key assets of the eCommerce and wholesale businesses. City Chic will also receive the benefit of a transitional services arrangement in connection with the Evans eCommerce business until April 2021. The transaction excludes the Evans “bricks and mortar” store network of over 100 locations in the United Kingdom. The administrators are entitled to trade from the existing Evans stores until the end of March 2021, in order to liquidate existing stock in the stores. The franchise business, based primarily in the Middle East, is also excluded from the acquisition.
Established in 1930 in the United Kingdom, Evans is a well-recognised specialty retailer of plus-size apparel and footwear, targeting a broad customer base across the conservative and fashion segments. In the financial year to August 2020, the Evans website had 19 million visits and generated approximately £23 million of sales and the wholesale business delivered sales of approximately £3 million. The Evans group (online, wholesale, stores and franchise) generated over £60 million of annual sales prior to COVID-19. Evans has high online penetration, with almost half of direct-to-consumer sales (stores and website) being through the digital channel.
The store portfolio has been shrinking for a number of years with customers transitioning to the digital channel, which City Chic anticipates will minimize any eCommerce sales leakage as a result of the administration-led store liquidation. The acquisition is expected to be earnings accretive in the first full year within the City Chic Collective.
The acquisition will be funded from City Chic’s existing cash balance. The company’s pre-acquisition cash balance as at 30 November 2020 was $121 million. City Chic’s $40 million debt facility will also remain undrawn.
The Evans assets will be acquired from entities within the Arcadia group, which entered into administration on 30 November 2020. The acquisition will complete on 23 December 2020, subject only to payment of the cash consideration.
Phil Ryan, CEO and MD of City Chic said: “The brand has evolved from a dominant high street retailer into a more digitally focused business. We had a successful partnership with Evans for many years which was a great channel for the City Chic brand in the UK. Evans gives us an excellent foundation in a new geography to grow our collective and is a brand which aligns with our existing product streams. The acquisition meets our strategic objective of growing through global customer acquisition, digitally, and in the $50 billion curvy apparel market. In addition to providing a launching pad into a new market, we are confident we can deploy our lean, customer-centric operating model to drive revenue growth and cost efficiencies in the existing business. We have a great opportunity ahead of us to develop the third major region for the City Chic Collective.”