Frasers Group buys Harvey Nichols out of administration for roughly £40 million, beating Next

Acquisition details

Mike Ashley's Frasers Group acquired luxury department store chain Harvey Nichols through a pre-pack administration on Thursday, 13 August, for roughly £40 million according to the Financial Times. The deal includes six stores in Knightsbridge (London), Manchester, Birmingham, Bristol, Leeds and Edinburgh, along with the online business, international franchise agreements, existing inventory and more than 1,000 employees. London's OXO Tower restaurant was sold separately to another buyer. The transaction ends 35 years of ownership under Hong Kong businessman Sir Dickson Poon, who bought the retailer in 1991. Administrators at FTI Consulting handled the sale.

A troubled retailer

Founded in 1831, Harvey Nichols had been loss-making for several years and appointed an administrator in June. Earlier this week, the chain warned in its latest accounts that it would need to "cease trading" within a year if it failed to secure fresh funding. Ashley told the FT last week that Harvey Nichols was in a "death spiral" and that turning it around would be a "huge challenge." Frasers beat out rival retailer Next in an auction process for control of the brand. Frasers said the integration would require "significant" restructuring, including a review of the store portfolio, organisational structure, operating model and cost base.

Murray's turnaround plan

Chief executive Michael Murray, who is Ashley's son-in-law, said meaningful change was needed at the chain.

“Harvey Nichols is an iconic British institution with significant potential, but it is clear meaningful change is needed. The turnaround will require tough choices and we are prepared to make those decisions, even if that means a smaller business in the near term, to create a stronger and more sustainable Harvey Nichols for the long-term.”

Ashley's luxury push

The acquisition furthers Ashley's push beyond Sports Direct's discount model into luxury retail. Frasers now controls a portfolio of more than 90 luxury department stores, having previously built stakes in Burberry and Mulberry and purchased US fashion chain The Webster last year. The group also launched a takeover offer for Hugo Boss in June, proposing to pay around €1.98 billion (£1.73 billion), or €38 per share, for the 74% of the German fashion house it does not already own. Frasers holds more than 30% of Hugo Boss according to the FT, though The Independent cited approximately 26%.

UK sports retail2.57

International retail1.6

Total group5.33

UK sports retail

2.57 £ billion

International retail

1.6 £ billion

Total group

5.33 £ billion

Data from the article text

Ashley told the FT he would bring a particular mindset to the luxury business.

“We'll show them a bit of Dunkirk spirit -- quote me, I don't care.”

He rejected comparisons between his discount retail approach and the luxury sector.

“It's completely different. It's totally ridiculous to compare the two. Luxury brands have to restrict [the supply of] products, they like scarcity and actually move it [the price] upwards.”

Frasers' financial performance

For the year to 26 April, Frasers Group reported revenues of £5.33 billion, up 8.7% from the prior year. International revenues surged 59.2% to £1.6 billion, boosted by acquisitions including Holdsport in South Africa and XXL in Norway. The UK sports retail division saw revenues fall 4.7% year-on-year to £2.57 billion. Bosses noted weaker consumer confidence despite the group's growth strategy.