The acquisition of the Karen Millen and Coast online businesses, plus associated IP rights, represents an interesting strategic development, with boohoo extending its reach into an older and more wealthy customer base. In the short-term, management plans to focus on consolidating its 7 brands ahead of peak trading, but with cash on the balance sheet, we see boohoo as well placed to make further acquisitions into new markets. Financials The brands were acquired from Kaupthing out of administration for £18.2m, funded by the Group’s existing cash resources (Q1 FY20 net cash: £194m). In its most recent financial year to February 2019, unaudited management information shows that direct online sales from the websites of Karen Millen and Coast totalled £28.4m (this figure excludes sales made on third party online platforms). We have no details on the profitability of the online operations, but assuming boohoo can achieve a 10% EBITDA margin on such sales (in line with group EBITDA), it has essentially acquired the online businesses from Karen Millen for 6.3 EV/EBITDA (ie: implying it could generate c. 15% ROI). Clearly, management will hope to use its platform to drive further sales. Brand profiles and proposed strategy Typically, Coast customers are 25 yrs+, while Karen Millen customers tend to be 30 yrs+, with the business operating at higher price points. The width of range for both brands online is small. For example, on the Karen Millen website, there are just 143 options for dresses. Management will look to focus on adding to the ranges using its Test & Repeat Strategy. In terms of pricing, we note that of the 143 dresses available on the Karen Millen website, the median price was > £100, with the Bestsellers often being over £150. Sourcing for both brands was previously c.50% from Europe and c.50% from Asia; management will attempt to source more from the UK The brands have a small footprint in International markets. 6% of sales were “Click & Collect”. Currently, the business has no stock commitments. The growth profile of the brands across both the High Street and online was previously flat, albeit faster in online Managment will focus on relaunching the brands’ websites onto the boohoo platform and installing ranges ready for peak trading in October. The brands currently have their own design functions, which management will not look to change.