After a financial year 2022-23, which turned the page on Covid on the back of very fine performances, Harrods signed a buoyant financial year 2023-2024 for its sales.
Sales at London department store Harrods rose by 8% to £898.4 million ($117.8 million), according to the accounts of Harrods Group (Holding) Ltd, owned by the Qatar Investment Authority.
Taking the group’s activities as a whole, which also include the Harrods Beauty (its beauty chain), Harrods Aviation (private jets), Harrods Estates (real estate) and Harrods China divisions, sales rose by 8.2% to £1.07 billion ($1.4 billion).
Profit down 35
On the results side for the department store, while operating profit also rose by 2% to £162.9 million ($213 million), pre-tax profit fell by 35% to £111.5 million ($150.8 million), £60 million ($78.6 million) less than the previous year.
The reason for this poor performance? The trustees of the Harrods pension fund took out an insurance policy with Scottish Widows to cover its pension fund liabilities, resulting in a £46.2 million ($60.5 million) write-down on the value of the fund’s assets in the company’s balance sheet.
Nevertheless, the department store’s business has been buoyant thanks to the return of tourists to the island since the end of the covid.
Better than its competitors
Proof of this rebound: the company has recruited 775 new employees, according to the accounts of Harrods Ltd, underlines the British financial press.
“ 2023 has been a year of strong financial performance for Harrods, reflected in our sustained and robust growth, which reaffirms our leading position in luxury retailing,” said a Harrods spokesperson.
To support its growth, Harrods has continued to invest, both in its e-business and in its physical store in Knightsbridge, where the restaurant has been refurbished and new areas for swimwear and eveningwear inaugurated.
The department store is faring much better than many of its competitors. Debenhams closed its physical units in 2021, Fenwick lowered the flag on its flagship Bond Street store at the end of 2022, Harvey Nichols, which has been in the red for the past four years, can only survive thanks to the support of its shareholder, and House of Fraser, taken over by the Sports Direct sporting goods chain after its bankruptcy, has closed many of its units…
John Lewis, on the other hand, returned to annual profits in its last financial year, which ended at the end of January.
Concerns for 2024
Nevertheless, while Harrods has managed to show resilience since the pandemic, the retailer has a number of concerns for 2024.
On the domestic front, Harrods executive Michael Ward is arguing fervently for the reinstatement of duty free for tourists from the European Union, abolished after Brexit. He has put the price difference between London and Paris at 20%.
Yet this competitive disadvantage is likely to weigh heavily as the weather clouds over for luxury consumption worldwide.
The Harrods spokesman emphasized that the recently unveiled results reflected “a period of significant growth for the luxury goods industry in 2023”. And he recalled that “the current national and global economic environment” was leading tomore difficult trading conditions in the luxury sector.
“ We remain confident in the company’s fundamentals and in the resilience of the luxury sector ”, he stressed, adding that ‘the company is maintaining its long-term growth and performance objectives’.
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