Luxury department store Harvey Nichols has been bought by the owner of Sports Direct, which warned a “significant restructuring” was needed to ensure the 200-year-old business remains sustainable.

Mike Ashley’s Frasers Group will take control of the Harvey Nichols stores, including its flagship in Knightsbridge, as well as the international franchise.

The department store was immortalised in BBC sitcom Absolutely Fabulous, but had faced challenges in recent years. The firm had appointed administrators in June.

Michael Murray, Frasers’ chief executive and Ashley’s son-in-law, called the store a “British institution with significant potential” but added “clear meaningful change is needed”.

“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 said.

Harvey Nichols carries more than 800 premium and luxury brands and has over 1,000 employees. Its other stores are located in Manchester, Birmingham, Bristol, Leeds and Edinburgh.

Frasers Group will also acquire the online business, and shops will continue to operate under their existing licensing.

Earlier this week, Harvey Nichols warned in its latest accounts that it would need to “cease trading” within a year if it failed to secure new investment.

It had faced “sustained trading and operational challenges” recently and Frasers Group said it will need to conduct a review of the store’s portfolio, structure and cost base.

A recent auction for the store saw Frasers battle retail rival Next to take control of the firm.

Harvey Nichols was bought in 1991 by Hong Kong-based businessman Sir Dickson Poon but he put the group up for sale earlier this year.

Dubbed “Harvey Nicks” by Edina and Patsy from Absolutely Fabulous, the two often found an excuse to nip into the department store for a spot of shopping and a long liquid lunch in the heyday of the 1990s.

But Catherine Shuttleworth, retail expert and boss of Savvy Marketing, said: “If you go into a Harvey Nicks store – and I did last week – they look terrible, they look really tired and basically they’ve suffered from a lack of investment.”

She told BBC Wake Up to Money that department stores “are cash-hungry monsters, they need investing, they need to look good and if you’re at the top of the luxury market that’s got to be constant”.

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”.

“Over the past year, we have made significant progress in repositioning this iconic business, investing in our flagship store, broadening our customer proposition, and strengthening the brand DNA,” she added.

As well as Sports Direct, Frasers has bought up a huge number of retailers and their brands over the years. These include upmarket fashion chain Flannels, Savile Row tailor Gieves & Hawkes and luxury lingerie firm Agent Provocateur.

It also owns Jack Wills and House of Fraser.

Shuttleworth said Frasers’ boss Murray has “got his finger right on the pulse of how those [young] shoppers shop”.

“If you look at what the group have done with Flannels, [Harvey Nichols] is going to be more Flannel-esque than it is going to be Sports Direct-esque,” she said.

Fraser Group’s purchase of Harvey Nichols is part of its strategy to increase its presence in the luxury section.

It recently launched a takeover approach for German brand Hugo Boss, which it has a stake in already.

Lindsay Hallam, senior managing director of administrator FTI Consulting, who advised Frasers Group on the sale, said she was “pleased to have secured a buyer, providing continuity for Harvey Nichols and enabling it to move forward under new ownership”.

“We are particularly pleased the transaction secures more than 1,000 jobs and provides a strong platform for its next chapter.

“Our focus was to find a solution that protected the underlying value of the business, securing a future for a 200-year-old retailer, and delivering the best possible outcome for stakeholders”.

Harvey Nichols’s restaurant in the Oxo Tower, London is being sold off separately and is not included in the deal.