Mike Ashley warns Harvey Nichols in 'death spiral' amid takeover race

Mike Ashley has questioned the prospects of Harvey Nichols as Frasers Group competes with NEXT to acquire the luxury department store from Sir Dickson Poon.

The Sports Direct founder described reviving the business as a “huge challenge” and suggested that Frasers could offer more than NEXT because Harvey Nichols fits with its existing retail portfolio.

“If it was a little bit tough before, it is in a death spiral now,” Ashley said in an interview with the Financial Times.

He said any buyer would need to account for future losses when setting its acquisition price.

Ashley expects Harvey Nichols to sell for less than £40 million. That price would be separate from the funding required to support its transformation, with prospective buyers previously told to make available £50 million to £60 million over the medium term.

He said Frasers was more likely to overpay because the acquisition would be a natural fit for the group, which owns Flannels and House of Fraser.

However, he indicated that neither Frasers nor NEXT would be deeply disappointed if they lost the auction. Final bids were due on Wednesday night, with discussions continuing on Thursday, according to the FT.

Sir Dickson’s family appointed FTI Consulting in June to oversee a possible sale after 35 years of ownership.

Frasers and NEXT have been viewed as the leading contenders. Gordon Brothers also joined the auction, while Dubai-based Chalhoub Group and India’s Reliance Retail have explored possible offers.

Harvey Nichols operates seven stores across the UK and Ireland, including locations in Leeds, Birmingham, Manchester, Bristol and Dublin.

It has recorded five consecutive years of losses. Revenue fell 5% to £204.8 million in the year ending 31 March 2024, while pre-tax losses increased to £34 million.