Despite difficult trading conditions, Harvey Nichols chief executive Joseph Wan sees opportunities to take advantage.

Chief executive Joseph Wan told Retail Week the department store group suffered a "sudden” and “significant” drop in sales following the collapse of Lehman Brothers and the banking crash. He said sales were in “freefall” from October but had stabilised after the winter Sales.

“A lot of wealth has evaporated and cannot be replaced overnight,” said Wan. “The total consumption pool has shrunk since last year. We must adapt.”

In the financial year to March 31 the retailer expects a 40 per cent drop-off in bottom-line profit to£10m, said Wan – down from£18m the year before. Group sales are likely to fall by around 5 per cent.

Despite difficult conditions Wan was confident that “more capable” retailers including Harvey Nics would ride out the downturn.

He said that Harvey Nichols is focusing on better stock management. “As long as we don’t end up with a mountain of stock, survival should be no problem,” said Wan.

He added that other measures include a new marketing campaign, launched this week in London, targeting tourists attracted to the capital by the weak pound. Spending by overseas visitors has contributed to stronger retail sales in London than elsewhere in the UK.

Harvey Nichols will also actively seek acquisitions, such as troubled businesses and brands.

“Next year will be a cautious one for the existing business operations,” said Wan, adding that capital expenditure investment for new projects would be frozen. “Maybe the right investment opportunity may be around the corner which could be bought at good prices.”

Harvey Nichols also remains committed to its schedule for store openings, which include a store in Kuwait. Discussions about a Nottingham store are ongoing.

“We are lucky enough to be in a good financial position,” said Wan. “Profit means positive cash flow. We are adapting to lower demands.”