Harrods owners bank £180m dividend despite dip in profits

The Qatari owners of Harrods have banked another £180 million dividend, despite a 17 per cent decline in operating profits at the world’s most famous department store.

The luxury retailer is owned by Harrods Ltd, a company in turn owned by the state of Qatar via its Qatar Investment Authority sovereign wealth fund.

The multimillion-pound payout came after operating profit at Harrods’ parent company fell by £35 million to £167.7 million in the year to February 3, according to accounts for Harrods Group (Holding) Ltd, which are due to be filed next week.

Profits fell after Harrods’ trustees completed a deal with Scottish Widows to take on the liabilities of its pension fund, resulting in a £46.2 million writedown. The decline meant that the highest-paid director at Harrods, understood to be Michael Ward, the managing director, was paid £2.1 million, down from £2.3 million a year before.

Turnover rose 8.2 per cent to £1.1 billion in the year as it bounced back from the pandemic, which limited international travel and tourism to Britain. It was slightly above the pre-pandemic figure of £1.04 billion in the year to January 2020.

A spokeswoman said that 2023 had been “a year of good financial performance for Harrods, reflected in our sustained and robust growth that reaffirms our leading position in luxury retail”.

She said the results reflected investment in its store in Knightsbridge, central London, and online. The company recently opened new swimwear and eveningwear departments as part of its “masterplan” and relaunched its dining hall.

Accounts for Harrods Ltd show that the company’s main retail business took on 775 more people as sales surged.

The rise in sales comes despite a wider slowdown in the luxury retail industry. The $350 billion sector, usually insulated in times of economic stress, has suffered slowing demand in Britain, Europe, China and America as higher inflation and economic instability have curbed people’s desire for luxury items.

The slowdown has prompted some of the largest players to trim their forecasts. Burberry, the British luxury retailer best known for its tartan check and trench coats, has issued several profit warnings, citing weaker spending “clearly related to the inflationary challenges and the cost of living issues”. Mulberry, Kering and Richemont have also predicted slower growth.

Many luxury goods groups have blamed the scrapping of VAT-free shopping for overseas visitors for a slowdown in sales in Britain. Harrods is among a number of retailers to have urged the government to “stop burying its head” and to rethink the removal of VAT-free shopping for overseas visitors.

Ward said the government should be “seizing opportunities to grow. I think it might be time for them to wake up and smell the coffee.”

The government has faced a series of calls from organisations including VisitBritain, Walpole, the luxury trade body, and Heathrow airport to restore tax-free shopping for overseas tourists. They say that London is losing tourism business to cities such as Milan and Paris.

The scheme, which allowed visitors from non-European Union countries to recover the VAT on purchases bought during their trips, was abolished when Britain left the EU in 2021.