The acquisition of Harvey Nichols lends immediate credibility to Frasers Group within the luxury space, thanks to the existing brand relationships the department store possesses with exclusive luxury players, and the prestige of the Knightsbridge flagship, says GlobalData, a leading intelligence and productivity platform.
Louise Deglise-Favre, lead apparel analyst at GlobalData, comments: “The Frasers Group has spent several years constructing a luxury proposition that it has been unable to fully realise. While Flannels provided scale, and the group’s shareholdings in Mulberry and Burberry provided proximity to brands, the houses that define genuine luxury, have remained reluctant to trade within a Frasers fascia. Frasers aims to fully capitalise on its newfound partners and has already indicated that it expects to deepen its relationships with Gucci, Prada and Dior. Whether the luxury positioning endures depends rather less on Frasers than on the brands themselves. Luxury department stores operate predominantly on a concession basis, which allows partners to withdraw quickly and at limited cost should they conclude that the Harvey Nichols prestige has been diluted.
“Michael Murray has been notably candid regarding what follows. His acknowledgement that the turnaround may produce a smaller business in the near term, together with a stated review of the store portfolio and cost base, indicates clearly that the six-store estate will not remain intact. The probable outcome is a more concentrated luxury proposition centred on Knightsbridge, with weaker stores absorbed under the other fascias within the group, such as House of Frasers or Flannels.
Deglise-Favre concludes: “The structure of the transaction is essential. Frasers has acquired the business out of administration, meaning that it assumes the stores, the inventory and the employees, while the liabilities remain with the former company. This represents an inexpensive entry into an asset that would have been unattainable had the business been trading healthily.”
