// Harrods reorganises £200m credit line as second English lockdown places it at risk of breaching covenants
// Accounts filed last week shows that Harrods has enough cash for the foreseeable future but recovery could be difficult
Harrods has reportedly been forced to reorganise its £200 million revolving credit facility as the second lockdown in England put it as risk of breaching covenants.
According to The Sunday Times, in August, the luxury department store renegotiated the terms of a credit line with the Qatar National Bank so as to avoid breaching covenants it made in April.
However, due to the closure of its Knightsbridge flagship amid the second lockdown for England, its worst-case scenario of being closed for four weeks was now a fact, placing Harrods at risk of breaching the covenants.
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The Covid-19 pandemic has already been a huge blow for the iconic department store, with a dramatic plunge in foreign tourists seeing its revenues drop.
In July, it made 680 job cuts out of its 4800-strong workforce – or around 14 per cent – in parts of the business most affected by the challenges of the first lockdown that had lasted three months.
That same month, Harrods managing director Michael Ward warned that Asian and US tourists – who account for around 70 per cent of its annual revenue – may not return to the luxury department store until 2022.
The retailer also anticipated a 45 per cent drop in annual sales as visitors to its Knightsbridge flagship post-first lockdown plunged by 95 per cent to less than 4500 per day.
Prior to the pandemic, Harrods saw an average of 80,000 daily shoppers.
According to fresh accounts filed last week, for Harrods’ financial year ending February this year – right before the pandemic gripped the UK and forced the whole country into lockdown – profits increased 11 per cent to £191.3 million.
Meanwhile full year sales came in at £871 million – a slight increase on the £868.5 million recorded in 2019.
Harrods also said it had enough cash for the foreseeable future.
Ward said that while the fundamentals of the business was still strong, should the government go ahead and remove tax-free shopping for non-EU tourists then its recovery after the pandemic could be impossible.
Ward previously said that due to restrictions on overseas travel, revenues in the current financial year is expected to be 45 per cent lower than in 2019 and still 35 per cent down in 2021.
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