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MatchesFashion went into administration a week ago, less than three months after Mike Ashley’s Frasers Group acquired the UK online fashion retailer. The official version was that trading conditions were so difficult, and the company losing so much money, its new owners had no choice but to pull the plug after having injected more than £20 million into it.

However, that’s not to say Mike Ashley, Frasers Group’s founder and controlling shareholder, won’t still come out on top despite the collapse of Matches. The high-street billionaire could still acquire the company’s stock on the cheap through the liquidation process that will follow the administration and sell it at a profit afterwards, industry sources said.

That would be true to form for Ashley, one of Britain’s most colorful and controversial businessmen. Ashley put his son-in-law Michael Murray in charge as CEO of Frasers Group in 2022 who was then 32-year-old and had little retail experience. Murray regularly tells British media he’s the one making decisions, but Ashley still has significant influence as he is a consultant and a director on the board. Many retailers believe he’s the one calling the shots. Ashley controls the London-listed company through a stake of more than 70 percent. He’s known for having a high-risk appetite when it comes to deals.

Ashley has been on a buying spree in recent years, cornering the sports goods retail market under his Sports Direct retail chain and buying stakes in many different retailers. Frasers Group also owns the fashion luxury multi-brand Flannels and since 2022, the prestigious Savile Row tailor Gieves & Hawkes. Ashley also has a 36 percent stake in British leather goods brand Mulberry. Mulberry’s board last year rejected Ashley’s demand for a board seat on the basis that it did not “consider he has the expertise that we need to grow the company.”

According to high-level industry sources in the French luxury industry, big luxury labels including those from LVMH and Kering group severed ties with MatchesFashion as soon as it was acquired by Frasers Group. The world’s leading luxury conglomerates have long feared tainting their prestige with buyers by association with mass market brands. Frasers Group was considered too risky a partner, these people said.

The company and its CEO Michael Murray did not reply to Miss Tweed’s requests for comment and questions.

DOWNHILL FROM THE START

Matches’ downhill chute after Frasers bought it on Dec. 20 has shocked the luxury industry. The reality is that it’s not only the economic downturn that caused the company to be placed into administration, several people with first-hand knowledge of the matter said. The company’s sales dropped dramatically because Frasers Group was the wrong fit from the start for the European luxury brands who supply Matches.

Ashley has a reputation as a brutal cost cutter and he approached Matches in the same manner he always does in turning round businesses, say people familiar with the events. Frasers forced hundreds of small and medium-sized fashion labels already struggling in a tough environment to accept 30-40 percent discounts if they wanted to get paid, these people said.

Frasers also cut the size of future orders. The group paid big brands like Kering’s Gucci, Balenciaga and LVMH’s Loewe but twisted the arm of the smaller brands to accept tough terms. Many refused and stopped working with the website. As a result, stock in-take fell as much as 50 percent and the company’s performance worsened as the newness and attractiveness of its assortment started to fade.

“Such behavior seriously damaged the perception of MatchesFashion in the fashion world and that of multibrand fashion e-commerce more generally,” said one member of staff who recently left Matches because of the way the company started treating partner brands. “Many houses refused Frasers’ harsh terms, but some smaller ones have had no choice because they need the money to produce the next collection. However, I suspect some will be in serious financial trouble because of what Matches is doing to them.”

SAVING MATCHES

Frasers told brands that it had “saved” Matches, therefore it deserved a discount, the former employee said. MatchesFashion’s top management was effectively “disempowered” by the company’s new owners and many of them resigned before the company went into administration, including CEO Nick Beighton. They did not want to be associated with the Frasers Group’s tough methods.

Sources close to the company say around half of the more than 500 brands sold on the website have not been paid in full for the stock they delivered and the orders that were placed. Matches’ debt to brands is estimated to be more than £30 million, several sources close to the company said. Most LVMH and Kering brands will have gotten paid, but they will still lose money going forward because their stock continues to be sold on the website, sources close to the company said.

This week, Matches’ home page was heavily advertising Saint Laurent’s new collection and offering an extra 20 percent off on many items from big and small brands.

On March 8, the Directors of MatchesFashion resolved to place the company into administration, and appointed Benji Dymant and Julian Heathcote of Teneo Financial Advisory Limited as Joint Administrators. Dymant declared then: “Like many luxury fashion retailers, MatchesFashion has experienced a sharp decline in demand over the last year, as a result of well-publicised pressures on discretionary spend, stemming from the high inflation and high interest macro environment. Since Frasers’ acquisition of MatchesFashion in December 2023 and an injection of additional funding, trading has continued to deteriorate, increasing the funding requirements of the business. This ultimately has resulted in the Directors taking the difficult decision to place the Company into administration.”

The company laid off 270 staff without compensation “to continue to operate” and it is expected that it will have to soon part ways with the 260 employees remaining.

Frasers told many media that it was not willing to fund a turnaround after the business had “consistently missed its business plan targets” and made losses.

EVERYTHING IS FINE

However, two months ago, the story was quite different. After Frasers Group acquired Matches, it went on a charm offensive, telling brands that it had big ambitions for Matches. The head of the wholesale department of an important European fashion brand told Miss Tweed on condition of anonymity: “The communication I got in January from the team was that they were going to keep the soul and spirit of Matches. And they would focus on accessories and luxury and reduce the contemporary, more accessible fashion assortment.” That person said Frasers even promised to roll out their Carlos Place concept – the company’s prestigious Mayfair townhouse where it hosts events – in the United States and the Middle East. On top of that mansion, Matches runs two other stores in London, one in Marylebone Village and one in Wimbledon where it was founded in 1987 by Tom and Ruth Chapman. The bricks-and-mortar boutique was called Matches and it was among the first in Britain to sell Prada, Dolce & Gabbana, Versace and other luxury brands.

After the financial crisis of 2008, it moved online to broaden its reach and in 2013, it rebranded itself MatchesFashion. When Apax bought control in 2017, in a deal that valued it at around £800 million, its ambition was to become “the number-one luxury fashion commerce company in the world”. The private equity firm lost more than £600 million in the process.

VALUE OF MATCHES IS IN ITS STOCK

Days before Matches went into administration on March 8, the company was still telling brands it was business as usual, several sources said. It was also still taking stock from them. The website currently says that it’s got lots of new styles that just came in.

One medium-sized French brand delivered more than €500,000 worth of stock to Matches London’s warehouse on the evening of March 7, hours before it was placed into administration. On March 11, the brand sent aggressive lawyers and a truck to try to get its merchandise back. “We’re not going to let them get away with it,” one of the managers at the brand said. However, when a company is placed under administration, its banks accounts are frozen and creditors such as supplying brands cannot get paid. Many labels are going to suffer from Matches’ demise. Some may try to organize a class action on the basis that the sequence of events looked premeditated and mistreating brands was sure to accelerate its downfall, several financial and industry sources suggested. “The directors of the company knew that the company was going under, yet they accepted stock knowing fully well they would not pay for it,” the CEO of one of the fashion brands that is fighting against Matches told Miss Tweed on condition of anonymity.

“To ask small brands for discounts means they don’t care about helping small brands and they don’t understand the industry,” one wholesaler told Miss Tweed.

On Monday March 4, there was a meeting between the senior management of Frasers Group and Matches. Frasers’ executives said they were disappointed by the performance of the business. Frasers Group managers said they realized they would have to inject several tens of millions of pounds more into Matches to make it break even and announced that they were no longer willing to support it.

The following day, on March 5, the three directors who had been appointed on January 4 by Frasers to the board of Matches resigned, official filings registered on Companies House show.

The plan appears to be the following: As of March 8, the administrators have 10 days to find a buyer for the company. If no one comes forward, which is likely, the company’s assets will be liquidated and Frasers Group will be able to acquire the company’s stock without its liabilities.

“The value of Matches is its stock. The platform itself is not worth much,” a specialist in distressed debt said.

Matches is estimated to be sitting on more than £100 million worth of stock at cost prices. If Matches goes into liquidation, a viable path for Ashley would be to acquire that stock and resell at a profit through various channels, including its Flannels retail chain. In the 12 months to February 2023, Matches recorded losses of £35 million on turnover of £380 million.

Under the deal signed just before Christmas, Frasers Group acquired Matches for £52 million and that money effectively went to the creditors who were owned around £150 million. The difference was written off. Apax Partners who sold the company to Frasers Group effectively got close to nothing.

Now hundreds of fashion brands will try to get some money out of Matches and some of their stock back. Good luck to them. Ashley is a professional. He’s made money from distressed companies many times before, industry specialists say. That’s partly how he built his empire and became so rich. Stay tuned.