Directors of Harvey Nichols have warned that the luxury department store chain will collapse into administration unless a rescue buyer is secured, according to the group's latest accounts.

The retailer will "cease trading" if it fails to agree on a sale and no additional funding is found, the board cautioned in filings at Companies House.

A buyer could emerge as soon as this week through a high-profile auction process that has drawn interest from high street giants Next and Frasers Group. Frasers, which owns Sports Direct and Flannels, is reportedly leading the race and may execute a takeover via a pre-pack administration in the coming days, Sky News reported. A pre-pack administration would allow a buyer to acquire the chain's assets immediately upon insolvency, avoiding prolonged trading disruption but typically leaving some creditors unpaid.

Frasers founder Mike Ashley is pursuing acquisitions to bolster his retail empire's push into luxury. Speaking to the Financial Times last week, Ashley described the department store chain as being in a "death spiral."

Directors Detail Bid Process

"The group has received a number of bids and is actively pursuing one or more such bids with a view to concluding a transaction within the going concern period," Harvey Nichols' directors said in a Companies House report.

"While a range of offers has been received by the group, one or more such offer would require the group to be in formal administration prior to sale. At the date of approval of the financial statements, no offer has been accepted."

The group reported a 10 per cent decline in revenue to £184.8m for the year ending March 2025, attributing the drop to weakening consumer confidence and reduced spending from international tourists. The decline in tourist spending reflects a wider headwind for UK luxury retailers, who have faced competitive pressure since the government abolished VAT-free shopping for international visitors in 2021, leaving London at a disadvantage against Paris and Milan.

Without a buyer, Harvey Nichols would need emergency funding or risk collapse within a year, the board warned. Potential bidders had been asked to commit between £50m and £60m to support the group's turnaround efforts.

However, Ashley told the Financial Times he was seeking a cut-price acquisition, estimating the chain would likely be sold for less than £40m.

Ashley Signals Caution on Valuation

"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," Ashley said.

He added that he "wouldn't be crying a river" if Frasers missed out on the acquisition, noting: "I don't think Next would be either."

Next, the FTSE 100 retailer led by Lord Simon Wolfson, has also participated in the auction. Under Wolfson's leadership, Next has acquired several smaller upmarket retailers in recent years, including Russell & Bromley and Joules, building a track record of absorbing distressed brands.

A Storied Brand Under Pressure

Harvey Nichols enjoyed its cultural heyday in the 1990s, famously featured as a fixture in the sitcom Absolutely Fabulous. In recent years, however, the chain has faced intensifying competition from rivals such as Harrods and Selfridges.

The group's Hong Kong-based owner, retail tycoon Sir Dickson Poon, is seeking a buyer capable of upgrading its store estate and advancing its international expansion efforts.