Harvey Nichols will collapse without a rescue deal, directors warn, as Frasers eyes takeover

Harvey Nichols has warned that if it does not find a buyer or receive a cash injection it will cease trading within a year. In newly published accounts, the luxury department store said one or more of the offers it was scrutinising would require the business 'to be in formal administration prior to sale'. Sir Dickson Poon, Harvey Nichols' Hong Kong owner, put the store up for sale in June and talks to sell part or all of the retailer are now at an advanced stage. Mike Ashley's Frasers Group, which owns House of Fraser and Sports Direct, has emerged as the front-runner to buy Harvey Nichols. An announcement on a deal could come as early as this week.Harvey Nichols said that while it was 'actively pursuing' one or more bids, no offer had been accepted. No additional funding has been found, the company added.No dividend is being paid to the company's shareholders and its accounts for the 52 weeks to 29 March 2025 have been prepared on 'a break-up basis'. Deal? Mike Ashley's Frasers Group is the front-runner to buy Harvey Nichols The department store's latest accounts showed its sales fell from £78.1million in the 12 months to the end of March 2024 to £69.4million a year later.Harvey Nichols' directors said the business had been adversely affected by currency movements and the cost of living squeeze. Luxury retailers have also faced pressure from the abolition of VAT-free shopping for overseas tourists and changes to the non-dom tax regime. Harvey Nichols reported a £178million pre-tax annual loss, largely the result of accounting write-downs on inter-company loans triggered by its break-up basis status. Separate accounts for the department store's online arm showed losses widened to £17million in the period, including a £2.5million impairment charge on an intercompany loan. Harvey Nichols has recorded five successive years of losses, but a major investment in its London flagship store is understood to have improved its performance. It said trade was hit by 'weak consumer demand as a result of the lingering cost of living crisis', while also flagging the ongoing impact of the 'loss of tax-free shopping in the UK'. Ashley poised to secure dealBillionaire Mike Ashley, who owns Frasers Group, is understood to be the front-runner to buy Harvey Nichols. Retail giant Next was another potential candidate to buy Harvey Nichols, but is understood to no longer be involved in the process. Ashley told the Financial Times last week that Harvey Nichols was 'in a death spiral' and claimed he would be able to pay more than Next to acquire the retailer.Ashley told the Financial Times: 'I don't think I'll be writing a huge cheque, because you've got to think about the future losses.'If it was a little bit tough before, it is in a death spiral now.'His comments will raise concerns among Harvey Nichols' 1,200 staff, as well as the future of its UK store portfolio, which also includes sites in Edinburgh and Leeds.Harvey Nichols has told prospective purchasers that they will need to commit up to £60million of investment to fund the ongoing transformation of the department store group.But some retail executives believe that number will be much higher if it is to be preserved in its current state.Ashley told the Financial Times that he expected Harvey Nichols to be sold for less than £40million.If the deal with Ashley goes ahead, it is likely that Harvey Nichols would be briefly placed into administration. If confirmed, the deal would strengthen Ashley's track record as the most prolific buyer of famous retail brands in Britain, having overseen earlier deals to buy businesses like House of Fraser, Jack Wills and Gieves & Hawkes. According to Sky News, a number of suppliers have raised concerns about Frasers being the new owner of Harvey Nichols following their experience of the group when it briefly owned the online premium fashion retailer Matchesfashion. Harvey Nichols traces its roots back to 1831, and had a spell as a public company, having floated on the London Stock Exchange in 1996. It was taken private again a few years later.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you