Why Mike Ashley’s growing luxury empire has the fashion industry on edge

0:05Hello and welcome back to the Glossy Podcast. I'm your host, senior fashion reporter Danny Parisi, and I'm here with our international reporter Zofia Zwieglinska. Hello, Zofia. Hi. Good to have you on. It's always good to have you on the podcast, but particularly this week because we are talking about something very British and you are the perfect person to explain this to us. But we're discussing the recent acquisition of Harvey Nichols by the Fraser's Group. Harvey Nichols is a big UK department store. More specifically, we are answering the question, who is Mike Ashley, who is the billionaire founder of Fraser's Group, who has been amassing a pretty significant portfolio of fashion brand stakes, retailers, real estate, all this stuff.

0:47And for the American audience, they may not know a ton about him. Maybe they've heard of the Fraser's Group. but he, I think, has his significance in the global fashion industry is growing. We wanted to kind of just answer the question, who is Mike Ashley? What is the Fraser's Group? What is their strategy? What are they doing? Why does all of that matter? And Sophia, since you have done lots of reporting on this and he's active on your home turf over there, I'm glad you could be here to explain it to us.

1:14Zofia Zwieglinska: Thank you. Yeah, I wrote a piece last week for the Luxury Briefing, kind of focusing on the buyout of Harvey Nichols from Fraser's And obviously with that came a lot of things that an American audience might not know. I think, you know, Mike actually may have crept on the scene of some people's kind of minds when he acquired the Webster. I believe that was earlier last year or late last year. And I think that's the first time that he's really stepped into America. Most of his stuff before has been very UK focused or European focused, as we've seen recently with Hugo Boss. Yes. So I'll tell you very quickly my perception of who he is just based on.

1:58I think I'm probably a little more knowledgeable than the average American because I cover the fashion industry. But this is what I've heard that his name comes up as like the owner of Fraser's Group who kind of aggressively pursues acquiring either fully or in part stakes in lots of different companies. and that there's sometimes a little bit of a negative reputation around Fraser's Group picking something up because it maybe means not good things for the company being acquired. That's my loose impression of him just from seeing headlines and news stories over the last couple of years. But give us a more detailed explanation.

2:35Like, who is Mike Ashley? And then we can go into Harvey Nichols and Fraser's Group and everything. But Mike Ashley, the man, like, tell us about him.

2:42Zofia Zwieglinska: Yeah, so you're absolutely right. Obviously, billionaire founder. He started out with Sports Direct, which I think would make fanatics the best kind of comparison base in the US. And, you know, to his supporters, which I'm sure there are many, you know, he's a sharp dealmaker. He has a reputation for kind of waiting for companies or brands to be in distress before buying them for a lot less than maybe what they're worth. And he built Sports Direct from one shop into this kind of multi-billion pound group. So I think it would be wrong to present him as someone without like a successful operating record.

3:19Zofia Zwieglinska: However, the way that he's operated, I think has been, you know, somewhat aggressive and some call it opportunistic as well. You know, he's kind of also been known for being very unpredictable and pretty opaque. I think there's been other companies in the UK that kind of explain themselves a little bit better to investors like Next. and with Ashley they don't know kind of how he acts there's a lot of times where he'll say one thing and then he'll basically do the opposite plus obviously there's been controversies you know you you mentioned um the luxury industry kind of being quite hesitant with him and especially in the UK I think they've got very good reason to to feel like that because Fraser's bought out matches which obviously was a very struggling um kind of retailer over here and they basically promised that you know they'll try and turn it around and within three months the whole thing closed and a ton of brands from you know super high luxury to independent designers over here were owed lots and lots of money um and couldn't even access their stock afterwards and there's also kind of older controversies around ashley and kind of how he thinks how he's done things with Sports Direct.

4:31Zofia Zwieglinska: There was a parliamentary inquiry in 2016 where they found that warehouse workers were being paid below minimum wage. And some of the practices in terms of employment were very disturbing. Ashley obviously admitted that workers had been underpaid. And he said that the company had grown too large for him to kind of control it properly. And then the other thing is, and obviously, you know, this is very UK focused, but he's deeply unpopular in Newcastle with Newcastle United, which is a UK football club. He was there as the kind of football club's owner for 14 years. And a lot of fans were very unhappy with how underinvested Newcastle was in.

5:12Zofia Zwieglinska: So he wouldn't buy new players. He would kind of prioritize Sports Direct advertising on the stadium. I think it was known as like the Sports Direct Arena, like their stadium for a little while. And yeah, obviously with Harvey Nichols now, on a number of the acquisitions recently, he's kind of steadily making his way into the luxury market, which I think this is where like people in the luxury industry, but also in the broader fashion industry are starting to get a little bit worried. Yeah. Well, the Newcastle connection is one other thing I did know about him. I'm a pretty big Premier League fan and I know people dislike him for that reason, but I was trying not to let that color my view of his fashion business.

5:53But it's interesting because I feel like the type of guy you're describing feels very American, like a sort of aggressive wheel and dealer who is a little bit shameless and, you know, maybe a little bit sleazy, but also very successful. Like that's a very we've got one of those guys in charge of the whole country, actually, right now. But is he what is Mike Ashley's like media presence? Is he much of like, I know you said he's kind of opaque to investors in terms of his business plan, but is he doing like interviews and is he on TV or is he kind of reclusive in that way?

6:30Zofia Zwieglinska: I don't think he's reclusive. I'm not sure how much he's been on TV, but I do know that he does give occasional interviews to the press. I think most recently last week he talked about, you know, Harvey Nichols and kind of the challenges that will be coming for the company with his under kind of his ownership. And that was a kind of direct interview with the Financial Times. So I do think there is like an opportunity to kind of ask him what he thinks. But I think a lot of the times his comments are very like straight shooting. Like he's not going to try and kind of wrap it up and make it pretty.

7:03Yes. Gotcha. So, OK, that's, I think, a really great portrait of Mike Ashley, the man. Let's talk about Fraser's group. Maybe we start with the most recent news, the Harvey Nichols acquisition, which you've touched on already. and then we can go into like their broader plan. But what's the perception of Harvey Nichols in the UK? Because again, my American, you know, loose impression is that it's pretty well known. Like I've heard of it. I know it's pretty big, but I don't feel that it's often mentioned in the same breath as like a Selfridges or a Harrods, which seems to be much more prestigious or at least maybe more successful.

7:38Like I just, from my perspective, I hear more about those two retailers and exciting things they're doing. I hear a little bit less about Harvey Nichols. Obviously, they're in the state now where they're getting sold. But how would you compare Harvey Nichols to those other two?

7:51Zofia Zwieglinska: Yes, I mean, you're absolutely right. I think that there is kind of a third retailer in London rather than one of the leading ones. You know, it's still one of really old business. It dates back to 1831. And it was never really supposed to be another Parrots, which is the Knightsbridge kind of branch of Harvey Nichols. is like 100 meters away from Harrods. So it's always had a little bit of trouble in terms of dealing with competition around the luxury kind of angle. But it kind of hit its maybe like cultural peak in the 1990s and has kind of steadily declined since then. There was a really famous creative director over there called Mary Portas.

8:32Zofia Zwieglinska: They became really well known for these like really cool window displays. They had younger designers, kind of very cool advertising. I'll probably compare it to like what Selfridges is doing now, what Harvey Nichols was doing in the 1990s. And then also there's a really kind of famous UK show called Absolutely Fabulous with Patsy and Adina where the store was regularly featured. I think the best comparison would be, I don't know, Barney's and Sex and the City. Like it's a really kind of part of British kind of culture and London culture. Going straight to the office. Yes. Past Harvey Nicks? No, Pats.

9:10Could we? when is nearly lunchtime 10 30 person well we can do harvey nichols quickly it was meant to be

9:20Zofia Zwieglinska: you know kind of fashionable and witty and a little bit like a badly behaved cousin and i think that that reputation has just changed so so much um the there's a hong kong businessman that kind of bought um harvey nichols in 91 and i think that expanded its presence it kind of started doing little mini stores all over the country. And I think that expanded its reach, but at the same time made it so that it had to kind of rein in this like bad boy image. When I visited the store last week, actually on the day that Fraser's was acquiring it, it was pretty dead and it still kind of feels a little bit devoid of personality, perhaps.

10:00Zofia Zwieglinska: They announced a kind of turnaround plan last year in terms of bringing in different brands and then kind of having a more interesting presence. But obviously with this buyout, the person who was in charge of that didn't really get that much time to actually implement something interesting. And I think with Selfridges and Harrods, they also have very strong identities abroad. Like I think that a lot of people, you know, who are from the States have visited Harrods almost as like, you know, you take off the London Eye and you take off Harrods in the same breath. Whereas Selfridges has become really well known for, you know, the window displays, for the in-store displays, for the beauty hall, like a lot of that is, it's kind of defining what department stores look like, not just kind of in the UK, but also in Europe and globally, like they're an example to kind of be had for other department stores out there.

10:54Zofia Zwieglinska: Whereas Harvey Nichols, I just don't feel like that's been the case. And whenever I go inside, it always feels a little bit lackluster to me. Obviously, in the UK, there's been a lot of things that have affected, you know, luxury and fashion and shopping. Most kind of importantly, you know, COVID and then afterwards, the removal of tax-free shopping, which basically means that incentivized shopping is gone and people won't be able to get a tax refund if they're traveling from abroad. So a lot of the times now, you know, department and stores in the UK have to fight with that. And I think Harvey Nichols was also really hit with that too.

11:31Yeah. And so now Fraser's Group is buying Harvey Nichols. I think we've seen many examples of a institution that has a long kind of cultural history, but is maybe not so financially successful at the moment. And then it gets bought up by this new management. I mean, you already mentioned the situation with matches, which is, you know, three months later, they were out of business and people were out of a lot of money. what's the feeling about the Harvey Nichols acquisition? Like, do people think, oh, here it comes, like, RIP to them now that Fraser's Group bought them? Or is there any feeling that, like, yeah, they might be able to turn it around?

12:09Because we can talk about other companies in Fraser's Group portfolio. Not all of them went into administration three months later. They have plenty of others that seem to be doing pretty well. So what's the feeling around this acquisition?

12:21Zofia Zwieglinska: Yeah, I think it depends who you ask. um obviously because of the fact that you know kind of ashley is maybe running things from from the shadows i think that there's been a little bit of a feeling that no matter what he says kind of out in public um it might be a very different story kind of behind the scenes and harvey nichols is obviously struggling it has a lot of stores i think as of last week um dublin which is one of the branches is already shutting down um and the website has also been put offline so i think that there's some concern now that, you know, what is the kind of next move? These are all kind of part of the things that were initially agreed in the prepack agreement that was decided last week.

13:02Zofia Zwieglinska: But I think that there's kind of more worries about potentially going down the matches route. The assortment is similar. You know, there's a little bit of concern around what is worth keeping. The Knightsbridge property in particular, I think, is one of the kind of crown jewels of that. There's There's a lot of, you know, good real estate there. It could potentially be turned around, but especially with the satellite stores, there may be some more that are closing. And obviously, with Ashley's reputation, I think the issue is that, you know, there might be brands who may be less keen to be associated with that, considering what they did with matches and kind of how the brands were affected, you know, since a lot of them weren't even paid and have not been paid to this day.

13:48Zofia Zwieglinska: And since a lot of them lost stock, like the idea that something like that could happen, you know, is a real concern. However, I mean, on the other side, actually has been buying into or buying up more and more of these kind of luxury or accessible luxury goods, like whether that's, you know, 48 % stake in Hugo Boss or the retailer in the US, the Webster, like that is something that kind of means that your reputation starts to matter a lot more because you're always going to be dealing with those same brands. I think that Harvey Nichols actually put out a release yesterday or someone saw a statement saying that they had, you know, complete faith in their brands and they want to make sure that everyone kind of stays on board.

14:33Zofia Zwieglinska: So we'll see if that changes anything. As of this moment, I don't know how many brands have already left, but I imagine a few. Yeah, it's interesting. I mean, I feel like there's we'll get into some comparisons later to other maybe to some equivalent situations in America. But I can't help but think about the Saks situation and all the brands that were stuck owed a bunch of money and never got it from that scenario. But let's let's talk a little bit about Fraser's portfolio, because you mentioned a few. They own nearly half of Hugo Boss. You put a nice document together that has all these. So I'm just reading from your notes here.

15:11But they own stakes in both Berry companies, Mulberry and Burberry. They have a 6 % stake in Puma, which is kind of surprising. I kind of forgot about that. They have sort of an odd portfolio. There's also a ton of real estate in there as well. And a lot of it has been acquired recently, like in the last couple of years. What's your feeling about the strategy? Like, what is Mike Ashley doing? I know you said he's kind of opaque. but um what what is the goal with taking you know a little bit of stake in this brand and then half a stake in this brand and then a full ownership of this retailer like they're all kind of fashion and there's definitely more luxury uh mixed in there it seems than maybe a couple years ago do you see any sort of coherent um strategy here yeah i mean for me i think that phrases kind of

16:02Zofia Zwieglinska: more widely is buying up different parts of like the fashion kind of supply chain or the kind of customer journey. So obviously they've bought brands. I think there's been some rumors around phrases and kind of what they sell that a big portion of that is Hugo Boss. And therefore, that's why Ashley invested so much in Hugo Boss, because the brand sells there and they want to have some kind of a deal. So that's kind of, you know, one way that they're already showing that, you know, they're planning for which brands are going to be most advantageous for them to own. With Mulberry, obviously, that's more of a different situation.

16:37Zofia Zwieglinska: I think that that's just a struggling kind of brand. You know, it hasn't been doing brilliantly. I think there's been some turnaround attempts over the last year or so. But before that, it definitely wasn't doing as well. And I think this might have just been an opportune moment for Ashley to kind of snap it up. But I think, yeah, what's interesting, and I don't know how much of this actually happens in the US. But Fraser's can essentially be a major wholesale customer of a brand, a shareholder of a brand, the operator of a competing retailer, the owner of the shopping center, and kind of through wider business, a provider of kind of logistics and consumer credit.

17:15Zofia Zwieglinska: So you're talking about essentially kind of owning every part of the customer experience, which I think is really interesting. And should he make more moves into the US, I think that there might be some people who will um bristle themselves against that i don't think that that's going to be very popular to have one person kind of controlling all of these different elements um there hasn't been any concerns kind of anti-competitive concerns so far because most of these places kind of sit um in in very different fields and obviously all the brands are different as well like mulberry has a completely different like proposition to burberry and and boss is the same but i think yeah there's there's kind of a worry that he might have very considerable kind of leverage over smaller brands and especially in London because obviously a lot of them had relied on matches for being like their first retailer their first move into retail and kind of the first way that they're interacting with customers and obviously matches closed down now Harvey Nichols is closing down like what does that mean for them getting their first kind of retail placement that's so interesting I was I I was just about to ask you about the regulatory element, if any of this activity had provoked any reaction from UK authorities or European authorities.

18:32And it sounds like not that much yet. But that is interesting, the fact that you could be operated by Fraser's Group, selling your product to Fraser's Group, and going to Fraser's Group for assistance with selling your product to Fraser's Group. Like, it's just interesting the way it can encompass the whole kind of process. I guess the fact that there are other retailers and there are other brands and other, like, I guess that's why it's not an anti-competitive concern yet. But definitely, if it keeps going this way, like, I would imagine regulators would start to take some notice. I also want to ask you about flannels.

19:07Flannels is also part of the portfolio. And maybe this is just my American perception, but I don't really know much about flannels. I saw in your notes that you said that it's often cited as one of the more successful luxury efforts from Fraser's Group. What exactly is flannels? And is that true that it is like a sign that they can operate in luxury?

19:28Zofia Zwieglinska: Yeah, I mean, flannels is also kind of really interesting because it has a kind of home base in London, similarly to Harvey Nichols or some other retailers. And then it also has mini stores based in cities kind of around the country as well. They do sell luxury goods. So it began basically as kind of this independent designer boutique, and then Sports Direct acquired the majority, and then Fraser's kind of expanded it. They started selling brands like Gucci and Saint Laurent, Montclair, alongside streetwear. I think that's kind of always been their proposition. It's kind of been more streetwear inspired, and obviously we've seen that trend go down.

20:07Zofia Zwieglinska: I think they're more maybe logo conscious. So again, And they got a lot of a boost when Logomania was in. The stores are usually very big, very kind of glossy, like a lot of kind of high touch surfaces, digital screens and marbles, loud music. I think it's quite, I really have trouble kind of understanding how the business is growing there because when I've gone to the London store in particular, it's actually been empty most of the time. So I don't know if they're getting massive orders from somewhere else or maybe just really very expensive orders from somewhere else. Or if the majority of their business is actually coming from these smaller stores that are based around the UK where people can have access to these luxury goods elsewhere.

20:57Zofia Zwieglinska: I would say that with the kind of rise of luxury e-commerce and obviously the e-retailer presence growing so that a lot of global retailers are now working in the UK as well. I think they probably have a lot of competition. I don't think it's quite as an attractive store, and I don't think there's quite as much kind of going on with it now to make it something on par with Selfridges or Harrods or even with some of the Parisian ones where you can now get that tax-free kind of rebate. Yes, and Flannels is also fully owned by Fraser's as opposed to just a stake compared to a lot of other things in their portfolio, which, as I said, But if you look through, a lot of it is like, you know, 5 % here, 40 % there.

21:44But flannels is one of the things that they completely own. Last thing I want to talk about is I thought it might be good to make a few comparisons to American companies and just other, you know, international companies with similar business strategies. The biggest one that comes to my mind is Authentic Brands Group, which is also known for buying up many distressed or otherwise flagging fashion businesses and trying to turn them around. The difference, though, I think is there's a few things. ABG relies a lot on licensing out the IP. So they buy brands and then they have somebody else operate it.

22:19And that's kind of part of their whole strategy of being kind of lightweight where they're not burdened with all of the operations of the brand. They're just like letting somebody else handle it. I don't think Fraser's group has done anything like that.

22:31Zofia Zwieglinska: No, I don't think so. I mean, definitely like the best comparison would be kind of authentic brands group, especially around some of the more kind of distressed assets that they bought up. And then, yeah, Fanatics is the best comparison, I think, for Sports Direct. And I think you mentioned Saks Global as well. Like that feels like kind of where Ashley and the Fraser CEO as well are kind of aiming for. It's more in that direction where they're having a bit more of a control over the global luxury pie. Yeah, for sure. And the other thing with Authentic is that they are now kind of moving into luxury a little bit, but they have been very, very slow and patient with that.

23:12Many years they have just been buying up definitely more mid-tier brands or mass apparel brands like Reebok and others. and only now are they just starting to kind of slowly, gradually dip their toes into luxury. I feel like the Frazers group has been much more aggressive and quick about like, like snap, we're doing luxury now and we're buying a stake in Burberry and we're buying this and we're buying that. I don't know if one is necessarily better than the other, but that is definitely a point of comparison. I think Authentic has been pretty, yeah, pretty patient and considered with moving into luxury, maybe wanting to really establish a stronger foothold in just fashion or apparel in general and then move into luxury because I do think luxury is has its own you know challenges and difficulties that is definitely unique and different to operating like you know a mall brand for teens that's not luxury at all yeah I think that that's the thing I think with

24:09Zofia Zwieglinska: the licensing aspect with with ABG I think that that's what makes it so different because I don't think that Ashley has that he's always kind of wanted operational control which I think is why you know especially with Hugo Boss he's kind of taken more and more of his stake upwards and he hasn't really demonstrated that with the other brands yet you know so Mulberry and Burberry and some of the others as well and obviously Harvey Nichols is a big acquisition but it's also a big cost like it's not something that is risk-free and he's not afraid to kind of shake things up But it will need a lot of money to kind of turn it around properly.

24:50Zofia Zwieglinska: I think in the luxury briefing from last week, what I kind of got to with some of my sources was that it would take 200 million, even though he's bought it up for 40 or 60, the numbers have not been published. But I think that there's been a lot of talk around kind of buying it up and kind of how much it's worth. But at the same time as we've seen with Sachs. It's not just about kind of that initial investment and money. Sachs had to, you know, pull out on financing across kind of multiple streams, focus on like long-term investment. And I think that would also be the case here where it's going to have to be a lot more investment and money and risk attached to it than, you know, maybe what ABG is doing.

25:35Zofia Zwieglinska: And he's still, you know, looking at other kind of prestige assets, so things that might be bought up for cheap and turned around. But I think that, yeah, it's a very different approach. Yeah. And I think in the next year or two, we will definitely be hearing more about Fraser's Group. It seems like they are not slowing down in terms of trying to buy up more, like you said, prestige assets and other brands. I'm sure they'll take a bigger stake in the brands they're already invested in, too, in addition to newer brands. And I do wonder if we'll start to feel more of presence in the U.S. as well, just because some of the brands, like obviously Harvey Nichols is more UK and Europe specific, but like a lot of the brands Puma and Burberry and Mulberry are all like international brands that are well known in the U.S.

26:22So as they increase their influence, I wonder if we'll start to feel a little bit more of that presence here. But I also think it's just relevant to if any of our listeners are thinking of doing business in the U.K., it definitely feels like the Fraser's Group is a bigger and bigger part of that business. Well, you did such a great job answering all my questions here. I'm glad that you have done all this reporting. He is a fascinating figure and I'm glad that you had so much knowledge to share. So thank you.

26:51Zofia Zwieglinska: Yeah, of course. And if you do get a chance, obviously check out the piece from last week, and I'm sure we'll be covering lots more around Phasers Group and kind of the continued acquisitions, buyouts and other things. So keep track of that. Yes, I will put a link to Zofia's story in the the podcast description. But that's all the time we have this week. Thank you so much, Sophia. And thank you for listening.

27:18And thank you for listening to the Glossy Podcast. Don't forget to give us a rating and a review on Apple Podcasts or Spotify, wherever you listen to this, because that helps us out so much. And don't forget to subscribe to the Glossy Podcast to hear interviews with industry insiders. And we can review segments where we break down the news. The new episodes come out every Friday. Until the next time, thanks for listening.

27:40I'll see you next time.