Harrods has delivered a strong set of results in a difficult climate. What is its secret?
Iconic department store Harrods provided a rare glimpse of hope in retail as it recorded a 9% uplift in sales in its full year accounts to £752m. It seems Harrods’ clientele are not letting the recession stop them splashing the cash.
Harrods’ figures seem to fly in the face of recent research which has said that the luxury market is slowing down. But while the likes of luxury brands such as Burberry or Louis Vuitton may be feeling the pinch in some of their stores outside of London, Harrods clearly doesn’t have this problem.
Harrods – like other upmarket London stores – has benefitted from the influx of tourists taking advantage of the weak pound. For many tourists, London is now far cheaper than their home countries.
And tourists are coming from all over. According to recent data, Chinese visitors spent 150% more in the West End between January and June, over the same period the previous year. Russians didn’t spend to the same extent as they have in recent years, but still upped their spending by 5%.
Summer is also a key time for Middle Eastern shoppers. And Middle Eastern tourists love luxury brands. The New West End Company said recently that the average US shopper in central London spends 60% less than the average shopper from Saudi Arabia.
Harrods has always, and will always be a tourist destination. And its shoppers clearly don’t care about the recession.
But Harrods hasn’t been complacent either. Pre-tax profits are down slightly, largely due to a multi-million pound store refurbishment programme. This includes spending £2.5m on repairing its world-famous terracotta façade, which is listed by English Heritage.
It is also near to completing a £9m revamp of the menswear department on the ground floor and lower ground floor.
These refurbishments mean Harrods remains a destination for shoppers with lots of money to spend. Those shoppers want to be surrounded by opulence while they’re browsing and Harrods has worked hard to maintain its splendour.
It is also being cautious – Harrods boss Mohamed Al Fayed did not pay himself a dividend for the year – but if he carries on going strong this year, he will probably achieve a bumper payout in 2010.