LONDON — Harrods saw its turnover and profit plunge in fiscal 2020-21 due to a twin attack from COVID-19 and Brexit.
According to figures released this week on Companies House, the official register of U.K. businesses, Harrods swung to a loss of 57.3 million pounds in the 52 weeks to Jan. 30, 2021. That compares to a profit of 191.4 million pounds in the previous year.
Harrods saw turnover fall by more than 50 percent to 429.5 million pounds as the store was forced to close due to the series of lockdowns imposed by the British government during COVID-19. Gross transaction value (including value added tax) in the 52-week period fell by 50.1 percent to 1.1 billion pounds.
The store said in a statement Wednesday that while 2020 started off well, business was derailed by the pandemic. The company said that growth was strong, and there was a healthy cash reserve.
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“This undoubtedly helped us weather the storm that was to come, and will help ensure our longer-term recovery and return to growth. The pandemic had an unprecedented impact on our business, defined by eight months of closure that threatened our ability to trade, coupled with an almost-overnight reduction in international travel. During this time, we took bold steps to protect our business and created innovative opportunities that allowed us to continue serving our customers, but the devastating impact the pandemic had on the business is reflected in these accounts,” Harrods said in the statement.
Like so many other British retailers, Harrods laid off staff during the darkest days of the pandemic in the summer of 2020. The store slashed up to 14 percent of 4,800-strong workforce.
In a memo to staff about the layoffs, managing director Michael Ward called the initial months of lockdown a “terrible period for the country,” adding that it would take “time and a drastic improvement in external conditions” for Harrods to recover and return to growth.
Ward added that in his 15 years running Harrods, he had overseen some challenging times, but COVID-19 was “undoubtedly the biggest challenge we have faced. Nothing compares to the sadness and loss at having to let valued colleagues go.”
In the latest Companies House statement, Harrods described COVID-19 as a “significant challenge for the business” and said the pandemic impacted every part of its universe, from employees to supply chain to customers and the wider community.
COVID-19 wasn’t Harrods only challenge in the period: Brexit also took its toll.
When the U.K. exited the European Union earlier this year, the government ended the tax-free shopping scheme for foreign tourists frequenting stores such as Harrods, Selfridges, Bicester Village and other fashion and luxury outlets.
The decision by the U.K. Treasury remains a thorn in the side of many British brands and businesses which argue that the rebate scheme gave them a significant competitive advantage over their European competitors. Harrods said it still cannot quantify the impact of the scheme’s cancellation on future trade as ongoing COVID-19 restrictions mean there are still very few foreign tourists shopping in the U.K.
Harrods also noted that import costs have risen due to Brexit, and that it incurred costs of 0.5 million pounds in additional duty and administration fees in the 2020-21 fiscal year. The store expects those costs to rise in the future due to increased prices from suppliers.
Despite those difficulties, the retailer marched ahead with some of its strategies, opening the first Harrods Outlet, a concept store at Westfield London selling men’s, women’s, children’s, beauty and accessories. The merchandise at the outlet would normally have been sold during seasonal sales at the Knightsbridge store.
During the year, Harrods also unveiled its H Beauty retail concept at the Lakeside shopping mall in Essex, England. It opened a second — and larger — unit earlier this year in Milton Keynes, about 50 miles northwest of London, and there are more stores in the pipeline.
In its statement issued Wednesday Harrods said it was looking to the future with positivity.
“We have a robust program that will return the business to strength, and while we know recovery will take time, the early signs are very positive. We have seen a huge return to demand for luxury, and expect strong sales figures as we head into the peak Christmas trading season. We continue to welcome more international customers back to our Knightsbridge store, and look forward to an exciting year ahead, including more H beauty store openings across the U.K., and our continued investment and presence in China.”
Harrods was one of many British retailers knocked by the pandemic — and by Brexit. As reported earlier this week, Matchesfashion saw a 9 percent decline in revenues to 392.1 million pounds for the year ended Jan. 31, 2021. Losses in the period widened to 36.6 million pounds from 5.9 million pounds.
Adjusted earnings before interest, taxes, depreciation and amortization was minus 23.5 million pounds, compared with a positive EBITDA of 4.5 million pounds in the previous year.
Matchesfashion said waves of lockdowns throughout 2020 led to lower demand for apparel associated with events and social gatherings. To wit, the company said its total wedding edit in 2020 was about half what it was in 2019.