Frasers Group, the retail empire founded by Mike Ashley, has acquired the Knightsbridge department store Harvey Nichols out of administration, adding it to a portfolio that already includes significant stakes in Hugo Boss and Mulberry, as well as full ownership of Flannels and House of Fraser.
The purchase comes during a challenging period for luxury goods sellers, as the cost of living crisis has reduced spending by aspirational consumers, and shoppers from Asia and the Middle East have been less inclined to travel to Europe. Despite these headwinds, the acquisitions align with Ashley's established strategy of buying bargains during tough times and finding value where he can.
Building a Luxury Portfolio
Since first buying a stake in Flannels in 2012, a menswear store in Knutsford, Cheshire, Ashley has slowly built a luxury portfolio. Flannels has expanded to about 75 stores and now sells brands from Gucci to Stone Island to Maison Margiela. This week, Ashley increased his stake in the German label Hugo Boss to 48%, just short of full control, despite opposition from the company's board.
The Harvey Nichols deal is seen as a classic tactic to gain access to brands that had previously been shy of engaging with the king of discount trainers, adding lustre to the portfolio. Ashley has said he intends to convert at least some of the five UK outposts outside London to the Flannels brand.
Mixed Results in Premium Ventures
However, labels considering supplying the department store chain might consider the events at the luxury online fashion seller Matchesfashion. Frasers bought the business for £52m at the end of 2023, only to place it into administration months later, leaving millions of pounds owed to designer brands.
House of Fraser is another cautionary tale. On buying the chain of 60 department stores out of administration almost exactly eight years ago, Ashley set a mission to become “the Harrods of the high street”. Today there are just five stores left trading under that name, with another 15 badged as Frasers. Sales at the group's “premium lifestyle” division, which includes House of Fraser and Jack Wills, fell almost 7%, while profits fell by almost £10m to £147.6m.
Analysts and Insiders Express Doubt
Clive Black, an analyst at Shore Capital, said that from a financial perspective, the group's spending on upmarket brands “has not been a roaring success”. He added: “The premium end of Frasers has been a burden for the wider group. The mothership is Sports Direct and that’s what is funding the wider diversification strategy.” Black suggested the strategy was driven by Ashley's personal aspiration, saying: “He has developed a penchant for bling in his 60s.”
Luxury market experts are also sceptical. One insider told the Guardian he would not have chosen to buy Harvey Nichols as its brand had become degraded, and suggested the building's freeholders, the Cadogan Estate, had long discussed turning it into a hotel or apartments. Another industry insider said Harvey Nichols “just feels like its lost its way”.
The old hand suggested Ashley's scattergun expansion may yet lead him astray, pointing to failed retail empires like Sears and Arcadia, and said running luxury brands such as Hugo Boss and Harvey Nichols might be a “bit of an overreach. It’s very different to a volume play.” He added: “The world of retail is littered with big organisations with an existing business that liked to acquire other brands and it doesn’t manage to succeed or end well.” However, he added of Ashley: “I wouldn’t bet against him.”
Ashley has a long history as a gambler, famously producing a wad of £50 notes from his pocket when taking journalists through security screening at the company's Shirebrook warehouse. Most of his business deals are underpinned by the value of stock or property, which can be traded to raise cash if other tactics fail. The future for Harvey Nichols and its new luxury brand stablemates might not be pretty, but Ashley is likely to make money however it turns out. Frasers Group declined to comment.
