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Harrods spends in-store – but is urged to invest online as profits fall

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Luxury department store Harrods showed how it had invested in ensuring that its 1m sq ft store remained a luxury destination for international shoppers this week as it reported a small rise in turnover but a fall in profits in its latest financial year.

But one analyst suggested it needed to invest online in a call that comes as the retailer looks to counter risks including Brexit and changing customer behaviour.

The multichannel retailer, which sells through its Knightsbridge department store, two shops at Heathrow Airport, and online for delivery to markets around the world, is a Top250 retailer in IRUK Top500 research. 

In the year to February 2 it turned over £868.5m, 1% up on turnover of £862.5m a year earlier, and reported pre-tax profits of £211.4m, 2.1% down from £215.9m a year earlier. Gross transaction value (GTV), excluding VAT, fell by 1% to £1.7bn. Over the year, it spent £64.1m on capital expenditure, primarily on luxury boutiques within the Knightsbridge store, and says it expects to spend more during the current financial year. 

The retailer, which is ultimately owned by the Qatar Investment Authority, listed Brexit and “its impact on the economic and commercial environment as well as human resources” as among its principal risks and uncertainties. This came alongside factors including changing customer needs and expectations, which create a need for “constant business transformation,” cyber attack, and events that affect international travel to the UK, including terrorism, natural disasters and movements in currency exchange rates. 

Analyst Emily Salter of data and analytics company GlobalData, said that as well as investing in its stores the retailer needed to invest online. She welcomed its ongoing work to redevelop its beauty halls and the recent opening of a new skincare emporium but said that the internet could help to give it a further edge. “Harrods should also invest in its online proposition, as rival Selfridges offers shoppers a delivery saver scheme including global shipping options, driving digital sales among international tourists after they have visited the store. This encourages shoppers to purchase more frequently than they might otherwise would, and could be highly beneficial for Harrods as it has a small store estate, relying on its flagship Knightsbridge store and smaller travel locations.’’

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