Everyone loves a bargain when they go shopping and retail companies are the same. Retailers don’t really want to cut their prices unless it means shifting large volumes, but what they do enjoy is buying rival businesses at a discount, either in part or full.
For years, Frasers was the king of this strategy, waiting with its chequebook as soon as any retailer went into administration. But in recent years we’ve seen Next take strategic equity stakes, while Boohoo and ASOS have been keen to buy companies or brands off the scrapheap.
“Boohoo might be facing slowing demand as its customers battle the cost-of-living crisis, yet that hasn’t stopped it taking a strategic stake in troubled make-up seller Revolution Beauty. The target recently ran into problems with its auditors over accounting issues, causing the share price to collapse,” says AJ Bell financial analyst Danni Hewson.
“While we still don’t know the outcome of this probe, Boohoo clearly didn’t want to put an opportunity to waste and has bought 7.1% of the business while the shares were going cheap.
“Boohoo bought assets from Debenhams last year as part of a plan to be a bigger player in the beauty products industry. Owning a slice of Revolution Beauty could speed up this strategy, particularly if it uses its status as a large shareholder to get good deals on product supply.