What now for Edinburgh retail landmark as Harvey Nichols sold?

The luxury department store chain, which includes a major store in Edinburgh’s St Andrew Square, had appointed administrators in June, and earlier this week, warned that it would need to cease trading within a year if it failed to secure new investment.

But the owners of Sports Direct will now take control of the Edinburgh store and five other UK outlets - located in London’s Knightsbridge, Manchester, Birmingham, Leeds, and Bristol - with plans for a “significant restructuring.”

The upmarket group, founded in 1831, had a transformational impact on Scottish retail when its five-storey, 90,000 square feet Edinburgh store opened in 2002, helping to attract other high-end brands to the city and bolster the economy.

But its fortunes have waned in recent years, with the loss of several luxury concessions and job losses in the midst of the Covid-19 pandemic.

The precise plans for the future of the Edinburgh store remain unclear, but in a statement, Michael Murray, the chief executive of Frasers Group, said that while Harvey Nichols was an “iconic British institution with significant potential,” there was a need for “meaningful change.”

“The turnaround will require tough choices, and we are prepared to make those decisions, even if that means a smaller business in the near term, to create a stronger and more sustainable Harvey Nichols for the long term,” he explained.

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“By integrating Harvey Nichols into our existing luxury ecosystem, we believe Frasers Group can deliver the expertise, infrastructure and commitment needed to give the business the best chance of long-term success.”

Frasers, which saw off competition from Next to buy the firm, which has more than 1,000 staff, said the imminent changes to the business would include a review and rationalisation of its store portfolio, organisational structure, operating model, and cost base.

Harvey Nichols chief executive Julia Goddard said the deal marked “an important milestone” for the company and “provides a strong platform for the next phase of the business's evolution.”

It is understood Harvey Nichols will incorporate the Flannels portfolio, also owned by Frasers, in the Edinburgh store, and there is speculation over whether parts of the existing store could be reconfigured. Frasers also own upmarket brands including Gieves & Hawkes and Agent Provocateur.

One industry source said that in recent times, the option of incorporating offices or a hotel into the upper floors of the store were looked at. The building is owned by Coal Pension Properties Ltd.

Read more: Harvey Nichols to cut up to 70 jobs at Edinburgh store

Elaine Parr, a senior partner and consumer products and retail industries leader at IBM, said the challenge facing Frasers was not just rescuing a department store.

“It is preserving the fascia, the brand, the buying authority, the culture, the heritage, the ‘Ab Fab dahling’, and the theatre, while fixing the economics,” she said.

“Harvey Nichols has lost money for five consecutive years. Revenue fell five per cent to £204.8m in the year to March 2024. Pre-tax losses widened to £34m.”

Donald Anderson, who was the leader of the City of Edinburgh Council when the Harvey Nichols store opened, told The Scotsman that although the retail sector was markedly different compared to 2002, the luxury market remained strong in the city.

“There’s no question that when we attracted Harvey Nichols to Edinburgh, the city desperately needed it,” he said. “We were losing 19 per cent of our retail spend in the area to Glasgow and Edinburgh was not punching its weight as a retail destination. It was a serious economic issue.

“In the intervening period, the arrival of the store helped spur the redevelopment of the St James site, and Edinburgh has gone from strength to strength. We have the largest luxury goods sector outside of London, and the St James Quarter is probably the best, most modern shopping centre outside London.”

He added: “The city is in a good place. Whilst at face value it would look very, very challenging if we were to lose somewhere like Harvey Nichols - and nobody is saying we will, but it remains a possibility - Edinburgh does not need it in the way it did before it arrived.

“If they were to concentrate on a smaller floorplate in the same location, that may work very well for Harvey Nichols. It’s been a tough time for department stores, and some of the brands that used to have places in Harvey Nichols now have shops in Multrees Walk, so the market has changed substantially over the years.

“It’s a tough environment out there, but there is still a luxury shopping market in Edinburgh and Harvey Nichols may well be able to prosper in that environment.”

As part of the sale, Frasers Group will also acquire the online business, and shops will continue to operate under their existing licensing. Harvey Nichols's restaurant in the Oxo Tower in London is being sold off separately, and is not included in the deal.

It is not the first time that Mr Ashley has been involved in the city’s luxury retail trade. The Jenners brand was bought by the House of Fraser for £46m in 2005, with the latter firm subsequently acquired by Mr Ashley’s Sports Direct group in 2018.

It departed the iconic Jenners store in Edinburgh’s Princes Street in May 2021 over a tenancy row with Anders Holch Povlsen, whose firm owns the building. The A-listed structure was devastated by fire in 2023, but is currently undergoing extensive redevelopment.