Boohoo buys 7.1% stake in Revolution Beauty

Fast fashion retailer Boohoo said on Wednesday that it has bought a 7.1% stake in Revolution Beauty, sending shares in the latter surging.

Boohoo said in a brief statement: "The investment builds upon the existing relationship between boohoo and Revolution Beauty, under which Revolution Beauty products are sold through several of the group's direct to consumer brand websites and its online digital department store, Debenhams.

"The investment reflects boohoo's belief in the growth potential of Revolution Beauty and it intends to be a supportive stakeholder and long-term partner."

No financial details were disclosed.

At 0825 BST, Revolution shares were up 29% at 31.07p.

AJ Bell financial analyst Danni Hewson said: "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.

"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."