Harrods, the prestigious luxury department store owned by Qatar Holding, has encountered a series of obstacles throughout 2020 due to the ongoing global health crisis. Despite the challenges presented by the pandemic, Harrods had managed to achieve a commendable increase in both sales and profits in the previous fiscal year. The company recently released its annual accounts with the UK’s Companies House, revealing a 4% growth in gross transaction value to £2.2 billion in the year leading up to February 1.
While overall turnover only saw a modest 0.3% rise to £870.8 million and operating profit increased by a slim 0.6% to £203.3 million, Harrods experienced a significant surge in pre-tax profit to £231.6 million and net profit to £191.4 million. The retailer continued its substantial investments in its flagship Knightsbridge location, nearly doubling its capital expenditure.
However, in the aftermath of the reporting period, Harrods faced unprecedented challenges arising from the pandemic. Recent reports suggest that the company renegotiated the terms of a £200 million syndicated loan to prevent breaching them in the coming months and had to reduce its workforce by approximately 700 employees, constituting 14% of its staff. The closure of stores and a decline in foot traffic in central London – a hub for both tourists and office workers where Harrods heavily depends on – presented significant difficulties for the iconic retailer.
Typically drawing in around 80,000 visitors daily, Harrods relies heavily on international tourism for a substantial portion of its sales. Despite Managing Director Michael Ward’s hopeful outlook for a potential recovery by 2022, recent advancements in vaccine development against COVID-19 offer a glimmer of hope for a swifter resurgence. The reopening of the Knightsbridge store in June showed promising initial results, albeit amidst low tourist arrivals in the UK. However, the current lockdown in England poses additional challenges for the retailer.
To diversify its operations, Harrods recently launched its inaugural premium H Beauty store at the Lakeside mall in Essex, with plans for another branch in Milton Keynes. Yet, the temporary closure of these new ventures due to the pandemic further complicates the landscape for the company. Additionally, the impending conclusion of the tax-free shopping system for non-EU visitors from the New Year poses a significant barrier for Harrods and other high-end brands.
While Harrods assured that it possesses sufficient cash reserves to endure the storm, uncertainties linger regarding the future. The potential ramifications of a successful vaccine distribution and alterations in consumer behavior post-pandemic could significantly impact Harrods’ recovery. As the esteemed retailer maneuvers through these trying times, it remains focused on adapting and strategizing to overcome the current obstacles and uphold its reputation as a premier luxury destination.
For more information on Harrods and its latest updates, visit their official website here. Additionally, to stay informed about the latest developments in the luxury retail sector, explore relevant articles on Luxury Daily here.
