Mar 1, 2021
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Selfridges sales were rising but pandemic meant huge challenges for retailer

Mar 1, 2021

Selfridges had already flagged the fact that its sales rose and its net profits fell in the year to February 2020, but it has now officially filed its annual results at Companies House and the full extent of that performance can be seen.

Photo: Sandra Halliday

It said revenue in the 52 weeks rose 5% to £852.9 million and net profit fell to £26.6 million from £77.9 million. But its operating profit was up 16% at £113.8 million, although this was primarily driven by the adoption of IFRS 16, while EBITDA rose to £217.3 million from £150.8 million.

Since the year ended, the company had been forced to close its four UK stores for months on end during lockdowns, although its digital business has continued to trade. But this couldn’t fully counteract the effects of its closed stores and conditions have been — and remain — challenging. The company fully drew down its £50 million revolving credit facility during the pandemic in 2020. It also renegotiated the covenants relating to that facility. And it has entered into an agreement that will allow it to borrow up to £80 million "from an entity under common control". It also reduced headcount by 14%. 

The company has concerns about the future given the end of the VAT retail export scheme following Brexit. This previously allowed non-EU shoppers to claim back the VAT on goods they bought through the retailer. While they can still claim this back, they can only do so if they have the goods shipped home rather than taking them home themselves, something few tourist shoppers seem keen to do. Selfridges has said that many of its overseas customers come from outside the EU and previously made use of the scheme, so sales are likely to be adversely affected.

Of course, there are currently few tourists in Britain who would have been able to take advantage of the scheme if it still existed in its previous form. But it looks like the UK might become one of the earliest European countries to open up to tourism because of the success of its vaccination programme. If so, it will become clearer just how much of an impact the changes to tax-free retail could have. Longer term, there are fears that retailers like Selfridges will suffer if large numbers of tourists shoppers choose to go to cities like Paris and Milan rather than London to buy their luxury goods.

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