Asos x MAC campaign.

LONDON — Asos has confirmed British media speculation that it’s eyeing the ailing Arcadia brands Topshop, Topman, Miss Selfridges and HIIT.

“The board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its customer base,” Asos said Monday, cautioning that there could be no certainty of a transaction.

The online fashion giant was responding to British media reports which had identified it as a new front-runner in the bidding process, after the British retailer Next dropped out of the race. 

Asos is understood to be bidding against the likes of Asda’s new owners, the billionaire Blackburn brothers Mohsin and Zuber Issa; Authentic Brands Group; the Chinese retailer Shein and Boohoo — and a winner could emerge in the next few days.

Boohoo could be the next to pull out of the race, having just confirmed its acquisition of the Debenhams brand and assets.

“The biggest competition Asos faces for Topshop comes from JD Sports and Authentic Brands’ partnership, as the two retailers’ experience in running physical stores may mean they place a higher bid to keep some of the brands’ stores,” said Chloe Collins, senior retail analyst at GlobalData Retail.

“While Chinese online specialist Shein is also a front-runner, it is relatively new to the U.K. market, and its brand equity is far weaker than Asos’. A bid has also been made by the Issa brothers, who recently acquired Asda, however their specialism in value clothing for family shoppers means they may struggle to understand Topshop’s young market and give the brand the revival it desperately needs,” she added.

According to media reports, Asos, a pure-play digital business, is not in talks to buy the brick-and-mortar Topshop stores, which could threaten a major portion of Arcadia’s workforce. Arcadia’s real estate is being sold off separately, and is not part of the auction.

Its acquisition could mirror Boohoo’s Debenhams deal, which saw Boohoo buying all Debenhams in-house brands and website, but not the real estate.

However, if Asos wants to keep up with its fast-fashion competitors, it might want to think about opening physical stores. Boohoo is said to be opening a physical space in London’s West End.

Asos added that any acquisition would be funded from cash reserves — a testament to its robust performance throughout the pandemic. 

In the four months to Dec. 31, the retailer reported a 23 percent increase in sales to 1.3 billion pounds. It succeeded in offsetting the decreased demand in occasionwear and its active customer base increased from 1.1 million to 24.5 million, while return rates went down.

Asos makes for a strong candidate to buy Topshop and its sister brands. Its growing customer base is more aligned with that of Topshop than Boohoo’s younger audience. It has an existing wholesale relationship with Topshop as well as a multibrand model, which mirrors that of Topshop.

And it could surely help to ramp up Topshop’s e-commerce strategy, a major weak spot in the Arcadia business pre-pandemic. It could also revive the struggling retailer’s once-buzzy image, which was clouded by the bankruptcy and by sexual harassment allegations against Arcadia owner Philip Green.

Despite its strong performance, Asos never managed to achieve the kind of fashion credentials that Topshop once had, with its own show at London Fashion Week and highly anticipated collaborations with everyone from designers Christopher Kane and Mary Katrantzou to celebrities Kate Moss and Beyoncé.

Beyoncé started her Ivy Park sport’s line in partnership with Green. She has since bought back the shares.

“Asos would, by far, be the most complementary new owner for Topshop, Topman and Miss Selfridge. The brands are already popular sellers through its third-party platform, proving that there is strong customer overlap, and Asos’ impressive global reach would help the Arcadia brands target new shoppers,” Collins said.

“Though Asos would not take on any stores, and it is unclear whether it would keep the brands’ websites, or simply use exclusivity to boost its own platform, the retailer’s digital prowess will aid the brands in gaining top of mind appeal, as they have so far fell behind online competition,” she added.

Arcadia’s bankruptcy, announced at the close of 2020, was one of the biggest casualties on the U.K. high street. The group has a pension deficit of 350 million pounds and 13,000 jobs remain at risk.

Matt Smith and Dan Butters, together with other restructuring partners at Deloitte, are working to find suitable buyers for the company’s eight retail brands.

Last December, the Australian retailer City Chic Collective Ltd. snapped up plus-size label Evans for 23 million pounds, but Topshop remains the group’s most appealing asset.