Harrods transaction values halved in pandemic, retailer swung to loss
Luxury department store Harrods has filed its accounts for the year to the end of January 2021 and they show just how big an impact closed borders and lockdowns had on its business.
The company – which is usually a tourist magnet as foreign visitors and those from the UK descend on London – said that its gross transaction value including VAT just about halved. It fell to £1.097 billion from £2.201 billion in the previous year. And turnover dropped to £429.5 million from £870.8 million.
That meant the business generated a post-tax loss of £57.3 million after posting a profit of £191.4 million in the previous year. The operating loss for the period was £66.4 million, down from a previous profit of £203.3 million.
The company had been investing heavily in the store but the pandemic period saw a reduction in capital expenditure to only £44.7 million from £114.1 million previously.
Harrods said that the pandemic was a "significant challenge" for the business with the Knightsbridge store closed during three lockdowns in the 12-month period. Its online channel saw year-on-year growth in line with what the rest of the retail industry was experiencing (it didn’t specify a percentage), but that couldn't make up for the closure of its massive Knightsbridge store.
Even after the reopening following lockdowns, Harrods was particularly hampered compared to many other retailers by the fact that inbound tourism was still a tiny fraction of what it had been pre-pandemic, and given its dependence on high-spending international tourists, that was a problem.
But the retailer said that it continued to stand by suppliers by continuing to pay punctually and in line with its agreements in order to ensure a strong supplier relationships throughout the pandemic and beyond. And its focus has been on ensuring that it reopened in as strong a position as possible to ensure a successful business in the long term.
The retailer added that in the long term, changes to the tax-free shopping rules that came into effect on January 1 this year could have a big impact, although it's not possible currently to quantify the impact given that international travel still hasn't returned to pre-Covid levels.
But it's already seeing the impact of Brexit with additional importing costs in duty and admin of around half a million pounds. This only relates to imports for which Harrods is directly responsible and it also said that it will incur higher costs eventually through increased prices from suppliers.
But even with all that taken into account, the company said it has considerable financial resources together with long-term contracts with a number of suppliers and it believes it's well placed to manage its business successfully in future.
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