Harrods set to match pre-Covid sales this year after reporting return to profit
Harrods’ results for the year to the end of January, showed the company recovering from the pandemic, despite ongoing issues related to the global health crisis during the period.
Gross transaction value at the business increased by 42.6% to £1.565 billion and total turnover increase 35.5% to £581.9 million, accounts filed at Companies House show.
Separately, Managing Director Michael Ward said sales are on track to reach almost £871 million this year, which is around the same level achieved in the pre-pandemic 12 months, although higher costs mean profits won’t be as big.
The Knightsbridge luxury emporium had been closed for only 10 weeks during the 12 months for which it was reporting, compared to 22 weeks out of the previous 52 weeks, and the increased turnover reflected that ability to open for longer periods, as well as a general recovery in trade during the final few months.
The business generated a profit after tax of £41.7 million in the 2021/22 year, which was much better than the £57.3 million loss in the previous period, while operating profit was up to £55.5 million from a loss of £66.4 million.
As mentioned, the pandemic continued to have an impact during the latest 12 months given some weeks of store closures, as well as slower tourist flows into the UK in general. But at least Middle Eastern shoppers were able to make up for the lower number of Chinese shoppers (down from 23% of its total sales pre-Covid to 15% last year).
And speaking of tourists, Harrods also said in the accounts that the biggest impact of Brexit on its business revolves around the removal of the Retail Export Scheme that came into effect at the start of January 2021. That impacted a huge number of luxury retailers with tourist shoppers no longer able to claim back the VAT on the luxury goods that they buy in the UK.
That said, the company did point out that it's not yet possible to fully quantify the impact of this change given that tourist traffic still hadn't got back to its normal levels during the year in question.
That slow climb back to normal levels would have been a major issue for the retailer, which is usually one of the top destinations for luxury shopper tourists (along with places like the West End of London and Bicester Village) in Britain. But even when tourists flows fully recover, the VAT-free shopping problem remains a big hurdle.
Michael ward told The Times: “The days of the Chinese tour groups are gone. The primary reason for Chinese tourists to visit the UK is shopping and now we are 20% more expensive than Paris.”
The company added in its accounts that import costs have also risen as a result of Brexit, and could rise further as suppliers increase prices.
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