High-end beauty and fashion chain reported profit losses of £66.5m, in what was a disastrous year for retail
Luxury beauty and fashion retailer Harrods has blamed its bleak 2020 accounts on the Covid-19 pandemic.
The high-end chain reported a turnover nosedive of more than 50%, while its gross transaction value was down 50% to £1,097m.
Together this contributed to a £66.5m downturn in profits for 2020.
Prior to the pandemic, Harrods had never closed for more than a day in its 150-year history, remaining steadfast even during Hitler’s assault on the UK capital during World War II.
The retailer said that store closures and a lack of international travel, as well as the UK government’s decision to remove VAT RES, which allows non-EU visitors to the EU to recover the VAT on purchases they make on the high street, had a significant impact on the business.
“Going into 2020, our business fundamentals were strong, underlined by continuing strong growth and a healthy cash reserve,” a Harrods spokesperson told Cosmetics Business.
“This undoubtedly helped us weather the storm that was to come and will help ensure our longer-term recovery and return to growth.
“However, the pandemic had an unprecedented impact on our business, defined by eight months of closure that threatened our ability to trade.
“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.”
In July 2020, Harrods took the decision to reduce staff numbers by more than 10% to cut costs during the difficult months presented by Covid-19.
In a letter to workers, Michael Ward, Harrods’ Managing Director, said the decision was made “with a heavy heart”.
He added: “I want to be upfront as to how we came to this decision, and what this will mean for you.
“I have been honest about the impact this pandemic has had, and will continue to have, on our business.
“I am sorry to say that after exploring every option available, we now recognise that we need to make changes to our operational structure, specifically looking at reducing our headcount across the business by up to 14% of our current workforce of 4,800 colleagues.”
Meanwhile, on its recovery, the Harrods spokesperson said that a huge return for luxury items would improve its sales as the retailer heads into the busy Christmas trading period.
“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 UK and our continued investment and presence in China,” they added.