Harrods plunged £68m into the red last year after pandemic lockdowns halved its revenues, according to recently published accounts, and the luxury department store is now facing a strike by dozens of restaurant workers.
During a year in which visitor numbers to London plummeted and stores had to close for weeks at a time, the Knightsbridge institution, which first opened its doors in 1849, has reduced staff numbers and ditched a dividend to its Qatari owners.
The company, whose owners collected £125m in the year to January 2020, said it was unlikely to pay another dividend for two more years. Harrods was bought by Qatar Holding, the investment arm of Qatar’s sovereign wealth fund, in 2010 for an estimated £1.5bn.
The company blamed government-imposed high street lockdowns for its difficulties and said it had more than halved spending to just under £45m while it reduced the number of staff by 145 to just under 4,000.
United Voices of the World, which represents waiters and chefs at Harrods, said it was balloting members about a strike in Christmas week after demanding pay be raised to a minimum of £12 an hour, from just over £9 an hour at present. It said unrest was partly prompted by a heavy workload for staff after job cuts.
Petros Elia, the general secretary of UVW, said: “Our members work in the most famous luxury department store in the world, and yet they are paid poverty wages whilst generating millions of pounds in profit for their bosses . Our members are not willing to tolerate this any longer.”
On Wednesday night, a Harrods spokesperson said: “Alongside the wider hospitality industry, Harrods has faced an extremely difficult 18 months, with long periods of closure that have entirely removed our ability to operate as normal. However, throughout this, our absolute priority has been the welfare of our staff and safeguarding as many jobs as possible.
“We are constantly reviewing our pay policies to ensure they are in line with industry best practice and as well as base salary, Harrods employees receive generous overtime, 100% service charge (minus a minor admin fee) and benefits package.”
Harrods cut jobs last summer after the chief executive, Michael Ward, said a slump in tourist numbers and the need for social distancing was having “a huge impact on our ability to trade”.
A note in the company’s accounts published this week said the Covid pandemic had been a “significant challenge” for the business, which had put the majority of staff on furlough during the enforced store closures. However, there was a rise in online sales over the period.
Harrods said its import costs had increased by £500,000 as a result of extra administration and taxes, while the removal of duty-free shopping for travellers in January this year was likely to hit trade from tourists.
The company said it had extended the terms of a £620m loan and a £200m credit facility repayable in April next year by 18 months.
In a statement issued after the accounts were published, Harrods said they reflected the “devastating” impact of the pandemic on business, but healthy cash reserves and strong growth before the pandemic had helped the retailer “weather the storm that was to come”.
“We have a robust programme that will return the business to strength, and whilst we know recovery will take time, the early signs are very positive. We have seen a huge return to demand for luxury and expect strong sales figures as we head into the peak Christmas trading season.”
The company said it was planning more outlets for its H beauty store across the UK and a continued investment and presence in China.