Harrods, the renowned luxury department store in London, has recently released its financial accounts for the year ending January 2021, shedding light on the significant impact that the COVID-19 pandemic had on its business operations. The pandemic-induced closed borders and lockdown measures resulted in a drastic decline in Harrods’ gross transaction value, which nearly halved from £2.201 billion to £1.097 billion. Furthermore, the store’s turnover also suffered a substantial decline, dropping from £870.8 million to £429.5 million. Consequently, the company reported a post-tax loss of £57.3 million, a notable contrast to the profit of £191.4 million generated in the previous year. The operating loss for the period amounted to £66.4 million, in stark contrast to the previous year’s profit of £203.3 million.
During the pandemic, Harrods was faced with the challenges brought about by the closure of its flagship Knightsbridge store due to three successive lockdowns. As a result, the store significantly reduced its capital expenditure to £44.7 million, a substantial decrease from the £114.1 million spent in the previous year. While Harrods’ online channel experienced similar year-on-year growth compared to the rest of the retail industry, it was unable to fully compensate for the losses incurred due to the closure of its physical store. Even after reopening, Harrods continued to face difficulties as inbound tourism remained significantly lower than pre-pandemic levels, thereby impacting the store’s reliance on high-spending international tourists.
Despite these challenges and amidst the uncertainties caused by the pandemic, Harrods remained dedicated to its suppliers by ensuring timely and consistent payments, fostering strong relationships throughout the crisis and beyond. The company focused on reopening in a robust position, employing strategies that would contribute to long-term success. Harrods also acknowledged the potential impact of changes to tax-free shopping rules implemented on January 1, 2021, although the full effect of these changes has yet to be quantified as international travel is still far from returning to pre-COVID levels. Another significant blow to the store’s business has been Brexit, as Harrods now has to contend with additional importing costs in duty and administration, amounting to approximately £500,000. The store expects to face higher costs in the future due to increased prices from suppliers as a result of Brexit.
However, despite the numerous challenges and financial implications stemming from the COVID-19 pandemic, Harrods stresses that it possesses substantial financial resources and maintains long-term contracts with several suppliers. This assurance gives them confidence that they will effectively navigate and manage their business in the future.
Useful Links:
1. Harrods official website
2. BBC article on Harrods’ financial accounts
