The Qatari owners of Harrods have paid themselves a second £180m dividend in a row despite a 35% fall in profits at the Knightsbridge department store amid fears of a slowdown in the luxury market.
The retailer, owned by the investment arm of Qatar’s sovereign wealth fund, increased sales by 8.2% to £1bn in the year to 3 February, according to accounts for Harrods Group (Holding) Ltd, which also operates a division serving private jets and sells goods to department stores overseas.
However, pre-tax profit slid by £60m to £111.5m after Harrods’ pension fund trustees bought an insurance policy from Scottish Widows to take on the liabilities of its pension fund, leading to a £46.2m writedown on the value of the fund’s assets on the company balance sheet.
The highest-paid director at Harrods, understood to be the managing director, Michael Ward, was paid £2.1m, down from £2.3m a year before.
However, the company’s main retail business took on 775 more people, accounts for Harrods Ltd show, as it bounced back from the difficulties of the Covid-19 pandemic, which limited international travel and tourist visits to the UK.
A spokesperson for Harrods said: “2023 was a year of good financial performance for Harrods, reflected in our sustained and robust growth that reaffirms our leading position in luxury retail.”
It said the sales growth reflected “stability and resilience in the face of market dynamism” and investment online and at its Knightsbridge store – where it relaunched its dining hall and opened new swimwear and eveningwear spaces.
Harrods has continued to increase sales while rivals such as Harvey Nichols, John Lewis, Fenwick and House of Fraser have struggled recently. Meanwhile, Debenhams has disappeared from the high street and Beales has only a handful of stores – with its Southport outlet due to close this month.
However, Harrods appeared to suggest 2024 was likely to be tougher, as many brands – from Burberry to Gucci and Tiffany – have warned of falling demand for luxury goods, especially from aspirational shoppers, who are stretching to buy occasional treats.
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The Harrods spokesperson said: “These results reflect a period of significant growth for the luxury industry in 2023. The current domestic and global economic environment has meant that current trading conditions in the luxury sector are more challenging.
“We remain confident in the fundamentals of the business, and the resilience of the luxury sector, and that the business sustains its longer-term growth and performance objectives.”