Paul Smith’s executive chairman has raised ethical concerns over Frasers Group’s recent acquisition of Harvey Nichols, highlighting the impact on suppliers following the luxury department store’s brief insolvency.
Ewan Venters, appointed chair of Paul Smith last October, criticized the use of a pre-pack administration process in the takeover, describing it as “dubious in terms of ethics and the way business gets done.” A pre-pack administration involves arranging the sale of a company’s business prior to the appointment of an administrator, with the transaction executed immediately after. Frasers, controlled by Mike Ashley, completed the acquisition of Harvey Nichols in August for £43.3 million via this mechanism.
The pre-pack sale has faced scrutiny because it often leaves unsecured creditors with significant unpaid debts. Harvey Nichols owed a total of £270.5 million to unsecured creditors, among them notable brands such as Victoria Beckham, Jimmy Choo, and Canada Goose. Administrators estimate these creditors will recover less than 15% of the amounts owed. Paul Smith itself was listed as owed £96,537.50 and has reported a near tripling in pre-tax losses to £16.7 million in its latest accounts.
Venters acknowledged concerns about the process but conceded that without the acquisition, Harvey Nichols “was about to go to the wall” and that Mike Ashley’s intervention might preserve the retailer’s operations. However, he expressed disappointment at the perceived lack of kindness in business dealings, arguing that treating partners and suppliers fairly could lead to better long-term outcomes and a healthier business environment.
Frasers’ involvement in luxury retail has been controversial. The group reportedly had to push its way into Harvey Nichols’ auction process, and its reputation has previously suffered following the 2024 administration of Matches Fashion shortly after its acquisition, which placed jobs at risk and left suppliers unpaid. Other unsecured creditors of Harvey Nichols include Jo Malone, Puig, and Estée Lauder, though preferential creditors, such as HM Revenue & Customs, are expected to be paid in full.
Despite the challenges, the acquisition has preserved over 1,000 jobs and secured the ongoing operation of Harvey Nichols’ flagship store in Knightsbridge and other UK locations. The department store, once popularized by the sitcom Absolutely Fabulous, had struggled to return to profitability under its former owner, Hong Kong billionaire Sir Dickson Poon, who faces losses estimated at £100 million from the sale.
Mike Ashley has expressed a long-term strategy to elevate his retail holdings, which already include Flannels and House of Fraser, by moving further into the upscale market. Recently, Frasers increased its stake in the German luxury label Hugo Boss to just under 50%, approaching majority control, and in July disclosed a stake acquisition in Burberry.
Paul Smith itself has faced a challenging retail environment with declining demand and wholesale difficulties contributing to six consecutive years of losses. Venters said he has aimed to sharpen the company’s focus by expanding direct-to-consumer channels and reducing wholesale exposure and costs. He anticipates a “step change” this year, expecting losses to be nearly halved, though the business will remain unprofitable during the initial recovery phase.
Frasers Group declined to comment on the issues raised.