Nasty Gal Melrose Avenue

Boohoo’s aspirations to become a global player in the online retail landscape have it eyeing low-hanging fruit Stateside in Nasty Gal.

The Manchester-based e-tailer this month registered the business Nasty Gal Ltd., following less than two weeks after the Los Angeles digital brand’s Chapter 11 filing in bankruptcy court for the Central District of California.

Boohoo has been looking to push into the U.S. and elsewhere with pop-up shops in April in both Los Angeles and Paris. There’s been heavy marketing with a “WeAreUs” campaign and collaboration with Jordyn Woods, with an L.A. launch party in August that brought out Kylie Jenner, Jaden Smith and Hailey Baldwin. The spring also saw the company push into men’s with the launch of the boohooMan.com website.

Boohoo closed up the first half of its fiscal year ended in August with about $159 million in revenue, based on current exchange rates. That’s up roughly 40 percent from the year-ago period with most of that generated in the U.K. The company reported adjusted earnings before interest, taxes, depreciation and amortization for the same August period of about $21 million, up 117 percent from a year earlier.

A spokesman for Boohoo declined to comment on the filing or if the company has put in a bid on Los Angeles’ digital darling.

The acquisition of Nasty Gal could certainly expedite a toe-hold in the U.S. by not only giving Boohoo customers but also an infrastructure backbone.

Nasty Gal in 2013 opened a 527,000-square-foot distribution center in Kentucky. Meantime, Boohoo keeps growing. The company said in September at the time of its half-year results that the addition of 275,000 square feet in its warehouse would be good for “medium term future growth” and that a second expansion was being planned.

Nasty Gal’s not the only business potentially on Boohoo’s plate. It’s also mulling an acquisition of another online retailer, Pretty Little Thing, with the option to buy that business open until March of next year. There’s been speculation the latest development with Nasty Gal could push the company to update the market sooner on a possible Pretty Little Thing deal. Investors have also speculated in chat rooms that Boohoo could pull the trigger on the Pretty Little Thing purchase after the close of its fiscal year in February 2017, when it’s plausible a deal for Nasty Gal could also materialize.

The Nasty Gal business’ address in the filing is listed at the Garden Studios Covent Garden flexible work office space in London and lists Boohoo financial controller Allan Pollitt as an officer of the company along with Boohoo itself.

Nasty Gal, started by Sophia Amoruso in 2006 as an eBay store selling vintage, shot to the forefront as a model of internet retailing, but seemed to stumble under the weight of its own rapid growth. The company hired Peter J. Solomon Co. in September 2015 to shop for a buyer or new financing, but as the business deteriorated so too did the prospects for pursuing a buyer or more capital, according to court documents.

Nasty Gal net revenue for its fiscal year ended Jan. 30, 2016 fell 9 percent to $77.1 million. EBITDA went from negative $6.3 million in the fiscal year ended in January 2015 to negative $15.4 million the following year.

A loan deal for Nasty Gal from Hercules Technology Growth Capital Inc., struck in November of last year, is now being challenged by the lender itself. Hercules claimed in a motion filed in court that Nasty Gal executives rejected proposals for additional liquidity that would have staved off bankruptcy and “instead chose to rush headlong into an ill-advised and unfocused Chapter 11 proceeding that will kill its brand, destroy its already damaged vendor relationship, burn valuable cash collateral without adequately replacing it and result in a liquidation at much more depressed values for all constituents….”

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