Selfridges sales jumped 5% to pass the momentous £1bn mark last year and furthermore, operating profits are expected to rise 5% to £133m when figures for the year are published this week. What is Selfridges doing so right?

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One area Selfridges clearly excels in is the appeal of its London flagship store, and the retailer hopes to add space to the Oxford Street shop with an extension. The store appeals equally to both domestic and international customers, unlike other luxury players such as Harrods which are heavily reliant on tourists.

It also appeals to a wide demographic; despite its luxury setting it stocks brands across the spectrum - from H&M to Helmut Lang and always has a list of brands eager to snap up space in its iconic store.

The London flagship is also on the cutting edge of store design with features such as the virtual mirrors it installed for its Triumph Essence line of lingerie which allowed shoppers to try on the underwear without undressing. Neil Saunders, managing director of retail analysis specialist Conlumino, says the “element of theatre” in the retailer’s stores make them a fun place to go to browse and that helps with footfall.

Outside the capital, Saunders says the Manchester and Birmingham shops perform “reasonably well” because, as well as the in-store experience and the product mix, there is less choice in the luxury sphere outside London. He says however that the regional shops are “important but not major contributors” to Selfridges’ sales.

He says: “Wherever Selfridges is, it is a draw and it pulls customers in. That means it is able to buck trends in cities and locations simply because it is a magnet for footfall and for customer coming to buy.”

Selfridges London store remains a key destination for overseas visitors. The retailer’s international appeal was demonstrated in May when it was named the world’s top department store retailer for the second time by the Intercontinental Group of Department Stores (IGDS). Selfridges targets tourists with store elements such as signage in Chinese and Arabic for certain fashion concessions, while it also has Mandarin and Russian-speaking staff on hand. It also accepts China’s most popular bank card, UnionPay.

Looking to appeal to an even wider range of consumers domestically, Selfridges introduced fast-fashion retailer H&M and value fashion giant Primark to its stores. Saunders believes it is inevitable such initiatives will have helped lift sales and are a good way of introducing new customers to the retailer.

Saunders explains: “It means Selfridges can be more relevant to younger consumers who don’t have high disposable incomes. Once you’ve got them in store, they may buy other things. Or as they mature and grow older, they may remain quite loyal to Selfridges.”

Selfridges arrived relatively late to etail, launching its online operation in March 2010. In May, head of online Zia Zareem-Slade said that attracts 1.4 million customers every month and that online revenues rose more than 100% for the 2011/12 financial year. Saunders says the online presence will help Selfridges extend its reach to a wider audience and that there is plenty of room for growth in online.

He notes: “I would say online remains quite immature. While a lot of players will have gone through extensive growth, Selfridges are at an early stage and have great growth prospects going forward.”

Next year’s results from Selfridges may not be quite as spectacular, since sales at its London store may have been affected by lower footfall during the Olympics. Further ahead, Saunders says that a slowdown in luxury and tourist spending, because of new perssures on countries including China, may also have an effect.

However he believes that Selfridges’ growth rate will remain above that of the average high street retailer, beacuse it will remain relevant to both domestic and international consumers as a result of investment in its brand, stores and online offer.