Harrods sales up, profits dip on revamp spend; MD says political issues could hit sales

By

Sandra Halliday

Published
Oct 7, 2019

Luxury department store Harrods is riding high despite a profits slip as its sales continue to rise. But its boss Michael Ward has warned that a possible Jeremy Corbyn-led government could dent turnover, claiming a more-left-leaning Labour Party could lead to exchange controls being reintroduced to stop the flow of money overseas.

Ward said that he was already aware of wealthy people moving money abroad. And The Times newspaper reported him saying that the first thing such a government would have to do “would be to put in exchange controls because the flow of funds out the country would be so great.”

The prospects of a general election are ever present in the UK at the moment and given the current Brexit-linked uncertainty, there’s no guarantee who might end up as Prime Minister.

Harrods sells more of its offer to international shoppers than to UK nationals so wealthy customers moving abroad, or fewer tourist arrivals, could undermine its business.

Ward, who has headed Harrods for 14 years, made his comments as he announced a dip in profits after pumping heavy investment into the Knightsbridge, London store. The figures were also affected by a shorter fiscal year. 

Harrods reported a 3% fall in pre-tax profits to £171.6 million in the year to February. But Ward also noted that Harrods spent £64.1 million in the past year on the store’s major overhaul, 17% up year-on-year. That spend is all about positioning it for a more profitable future. 

Changes included an upgraded beauty hall and work to boost its menswear and sportswear experience.

However, despite lower profits, sales rose to £868.5 million from £862.8 million as the store attracted more customers via its ultra luxe focus and exclusive deals with labels such as Dior.

The makeover seems to be paying off as the firm is also appealing to more young consumers and therefore constantly refreshing its consumer base. “For a crumbly old business like Harrods, a third of our beauty customers are Millennials,” Ward also said.

He explained that in the past 12 months, 185,000 sq ft of space had been closed and refitted, and to make the point about what Harrods is doing compared to revamps at rival stores, he said that’s “equivalent to the whole of Liberty's and Harvey Nichols together. We've had 18 months of real pain during the redevelopment, but it will be worth it.”