The boss of Harrods said he was confident that the luxury department store would prosper in an economic downturn because “the rich get richer in a recession”.
Managing director Michael Ward, who described the retailer as a “shop window to the world”, said the business was now “trading ahead of 2019 [levels]” after it was hit hard by the Covid-19 pandemic and a lack of tourists in London during lockdowns.
“Covid was a good kick for us to refocus on our local customers. We continue to go from strength to strength here,” Ward told the FT, adding that British shoppers were now responsible for the majority of spending, in stark contrast with 2017 when Chinese nationals became Harrods’ biggest spenders.
“Statistically the rich get richer in a recession . . . whatever your political persuasion,” he said in response to a question about whether a worsening economic climate would impact Harrods.
Most households in all income brackets suffered losses in income last year, but richer people have enjoyed a sharp rise in stock market performance since the middle of October last year.
Ward’s remarks come after a recent report predicted another strong year for luxury goods sales despite soaring inflation and higher bills. Analysts at Bain & Co and Altagamma said they expected the €353bn sector to grow by “at least” 3 to 8 per cent in 2023. Meanwhile, French luxury group Hermès had an “exceptional” year with a 23 per cent jump in annual sales to €11.6bn, and industry giant LVMH posted record profits for 2022.
Ward, who has been at the helm of Harrods since 2005, also said that the Windsor framework, designed to reform Northern Ireland’s post-Brexit trade rules, was “a real step forward” in the UK’s fraught relationship with the EU, even if an optimal arrangement wasn’t “there” yet.
“We’ve got to start having intelligent conversations within the UK government and stop this ‘if it happens in Europe it’s bad and it’s got to be different in the UK’,” he said. “And certainly the change in prime minister has helped that.”
Harrods, which was bought from the Egyptian businessman Mohamed Al-Fayed by Qatar’s sovereign wealth fund in 2010, stopped sending its luxury hampers to Europe due to the cost of Brexit-related red tape.
It also sees the government’s refusal to reinstate tax-free shopping for tourists as an existential threat.
When the UK was still part of the EU, shoppers from outside the bloc had been able to claim a VAT refund on most shopping receipts but the rule was scrapped after Brexit.
When Chinese tourists plan to return to Europe in the second half of the year, “France is the only European country that’s mentioned”, according to Ward. London is still the capital of luxury to him, “but I think we’re in danger of losing that”.
Ward also said that shoppers increasingly bought goods from a few prestigious “superbrands” such as Louis Vuitton and Hermès, leaving other brands exposed.
“Burberry’s got a challenge,” he said, citing the British heritage luxury group’s slow move into selling accessories such as shoes, which typically have higher margins.
“The constant trend is people going for more and more and more premium items. The rise of the superbrands is getting absolute, so that middle ground of the market is becoming tougher and tougher.”
Additional reporting by Chris Giles