Mike Ashley promises ‘Dunkirk spirit’ as he barrels into the luxury industry
High street billionaire claims Frasers has moved on from its discounting ways as it swoops on Harvey Nichols
As Mike Ashley’s Frasers Group sealed the acquisition of Harvey Nichols this week, a question was left hanging over its luxurious Knightsbridge department store: can a man who built a fortune from the bargain bins of Sports Direct finally change his discounting ways?
The roughly £40mn purchase of Harvey Nichols via a pre-pack administration furthers Ashley’s push beyond trainers and tracksuits and into the rarefied world of luxury.
As well as building stakes in British luxury brands Burberry and Mulberry, Frasers last year purchased upmarket US fashion chain The Webster. With the addition of Harvey Nichols, Frasers now controls a portfolio of more than 90 luxury department stores, making it a distribution channel that many brands may no longer be able to ignore.
The UK retail group also launched a takeover offer for Hugo Boss in June. While it appears destined to fail, Frasers’ more than 30 per cent holding leaves it well placed to influence the German fashion group’s operations.
“We’ll show them a bit of Dunkirk spirit — quote me, I don’t care,” Ashley told the FT in an interview from his home in Mallorca.
The flurry of dealmaking has raised questions over how a hard-nosed businessman known for piling it high and selling it cheap will adapt to an industry based around exclusivity and discretion.
Ashley had his start buying brands 30 years ago with a deal for Donnay. He outsourced the tennis brand’s production and used the savings to discount it heavily in Sports Direct, aggressively undercutting Nike and Adidas and setting the blueprint for the retailer’s growth.
The billionaire indicated, however, that he will not bulldoze his way into the luxury market in a similar fashion.
“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,” he said.
Ashley said that moving into luxury was a “natural progression” for Frasers and that the strategic shift, which has been accompanied by broader international expansion, was made possible by his long-term perspective as majority owner of a business he founded in 1982.
He added that other bosses would not be able to countenance similar moves without considering how it might “ruin their valuation” but he was not bound by the same constraints.
“It’s OK, because I’m not selling [my shares],” he said. “When the team gives me ideas I’m saying ‘go for it’ — there’s an open door.”
Much of the apprehension around Frasers’ arrival on the luxury scene stems from its brief and chaotic ownership of Matches Fashion, which ended with Ashley’s group calling in administrators to the online luxury retailer three months after buying it in December 2023.
That decision left hundreds of Matches’ suppliers, including Prada, Gucci and Burberry, on course to receive approximately a penny for every pound they were owed.
Lucy Delius, founder of the eponymous fine jewellery brand and a former Matches supplier, said that if she were stocked in Harvey Nichols she would sever ties with the retailer “immediately”.
“Mike Ashley doesn’t care about brands, he just cares about making money — which is business. But after what happened with Matches, I can’t say Frasers is a great partner for an independent brand like mine,” she said.
Frasers, which recouped all of its investment in Matches, pulled the plug on the business after falling out with its management, according to two people close to the situation.
Ashley said that Matches was in a worse financial position than Frasers anticipated and that “it should have been shut down years ago — it was trading insolvent. Sometimes the hole is too big”.
Michael Murray, Ashley’s son-in-law, was promoted to chief executive at Frasers four years ago. He has been leading the group’s attempts to move upmarket by refurbishing stores and adopting a more collaborative relationship with brands.
Frasers’s 36-year-old chief said the company was “building something different in luxury”.
“Our ambition is to create a scaled luxury ecosystem where brands can grow with us,” Murray said. “Frasers is becoming a genuinely strategic partner to the world’s best luxury brands and helps them reach their next generation of customers.”
Ashley concedes that his fitness-obsessed son-in-law — who he describes as “the pretty boy” — is a more acceptable face to luxury brands than that of a man who once described himself as “a power drinker”.
“I’m Marmite — I’m not everyone’s cup of tea,” said Ashley, who has stepped down from Frasers’ board. He added that Murray makes the final call on investments.
Harvey Nichols has been on the high street tycoon’s radar for years but it comes into Frasers’ ownership at a low ebb. Its pre-tax losses widened to £49mn from £34mn last year, prompting Ashley to claim the business is in a “death spiral”. Frasers warned on Thursday that it would likely close some of the chain’s seven stores.
“Mike always reminds me of people who try to win ‘Monopoly’ by building up the crappy brown properties,” said Nick Bubb, an independent retail analyst. “I don’t think that buying up bankrupt businesses on the cheap is a recipe for success in this market. I’d rather see him paying up to buy some dark-blue properties.”
Ashley is pushing into luxury in the midst of an industry downturn that is entering its third year. Revenues at Frasers’ so-called premium lifestyle business — which includes luxury fashion chain Flannels, Jack Wills, House of Fraser and Savile Row tailor Gieves & Hawkes — fell by 6.9 per cent to £975.7mn last year.
Murray said the performance reflected a “long journey” at Flannels, which sells brands including Coach and Balenciaga, mainly in provincial towns and cities. The retailer trades from more than 50 stores in locations including Blackpool, Stoke-on-Trent and Wolverhampton.
Ashley remains undeterred. In July, Frasers disclosed it had built a 4.2 per cent stake in Burberry, worth about £170mn, via derivatives. That added to a pre-existing 37 per cent stake in Mulberry.
He said that he was driven to invest in Burberry — which is stocked in Flannels — because of a belief in the turnaround being led by chief executive Joshua Schulman.
“Sometimes I buy because I have faith. I’m very happy with it. There’s noise about how much the chief executive earns — I want him to earn even more, pay him more! Because if he earns more, does more, my shares are worth more. It’s simple,” Ashley said.
Historically, people close to Frasers have said the company buys stakes in other brand owners as a means of gaining better access to their products. However, a person who has advised the group said that when Ashley’s stake buying works, he benefits on multiple fronts.
“If he does well with Boss, he does well both as an investor and for Frasers in terms of gaining more access to product, which also boosts Boss sales,” the person said. Boss is Frasers’ biggest-selling non-sportswear brand, according to a person close to the company.
Frasers’ offer for the company came after it built a position via share options that was set to take it above the 30 per cent threshold at which it would be forced to make a bid. Only 7.3 per cent of Boss’s other investors took Frasers up on its offer that was pitched at just a 4 per cent premium.
“I want more [Boss] shares, so I’m going to keep buying them. I don’t care about owning all of it,” he said. “I believe Boss has the potential in the medium- to long-term. I just think it’s very cheap.”
Ashley said he builds stakes in other companies because it is “just my wheelhouse” and not an extension of a penchant for gambling that saw him initiate a game of spoof to settle the bill for advisers’ fees on Sports Direct’s IPO.
“This is genuinely investing to get the company. I want to own a bit of the business,” he said. “I’d be buying SpaceX or Bitcoin if I wanted to gamble.”