Harrods, the iconic luxury department store in London, has made a remarkable recovery from the devastating impact of the Covid-19 pandemic. Despite ongoing challenges related to the global health crisis, the company has reported a significant increase in its financial performance. In the year ending January 2022, Harrods’ gross transaction value surged by 42.6% to £1.565 billion, and total turnover rose by 35.5% to £581.9 million. These figures demonstrate a strong comeback for the renowned retailer.

One contributing factor to Harrods’ success was a decrease in the number of weeks the store had to remain closed. During the reporting period, Harrods was only closed for 10 weeks, compared to the 22-week closure in the previous year. This longer opening period allowed the company to generate higher turnover and capitalize on a general recovery in trade during the final months. The positive financial results were also attributed to the significant improvement in profit after tax, which rose from a loss of £57.3 million in the previous year to a profit of £41.7 million in 2021/22. Additionally, operating profit experienced a remarkable turnaround, increasing from a loss of £66.4 million to £55.5 million.

Despite these encouraging results, Harrods still faced challenges due to the lingering effects of the pandemic. Store closures and reduced tourist flows into the UK continued to affect the business. However, the decline in Chinese shoppers, who accounted for 15% of total sales in the previous year (compared to 23% pre-pandemic), was offset by Middle Eastern shoppers. These shoppers played a crucial role in compensating for the loss of Chinese tour groups.

Brexit also posed challenges for Harrods, particularly due to the removal of the Retail Export Scheme in January 2021. This policy change had a significant impact on numerous luxury retailers, as it prevented tourist shoppers from claiming back the VAT on their UK purchases. The full implications of this change are yet to be fully understood, as tourist traffic had not fully returned to pre-pandemic levels during the reporting period.

The absence of Chinese tour groups, who primarily visited the UK for shopping, has been a major setback for Harrods. Moreover, Brexit-related costs have compounded the challenges faced by the company. Import costs have increased, and there is a possibility of further price hikes initiated by suppliers.

Nevertheless, Harrods remains optimistic about its future performance. Managing Director Michael Ward stated that sales are expected to reach nearly £871 million this year, indicating the potential to match the pre-pandemic levels achieved before Covid-19. However, it is likely that higher costs may impact overall profits.

Looking ahead, Harrods recognizes the importance of adapting to the evolving retail landscape and addressing challenges posed by geopolitical factors such as Brexit and the ongoing global health crisis. The company’s ability to adapt to changing consumer behaviors, attract diverse shoppers from various regions, and deliver an exceptional luxury shopping experience will be pivotal in sustaining its success in the years to come.

Links:
1. Harrods Official Website
2. BBC article on Harrods’ recovery