Harrods lockdown closure prompts credit renegotiation

Harrods Group modified the details of a syndicated loan in August to avoid breaching covenants, The Sunday Times reported.

Part of Harrods’ worst-case scenario when it rejigged the covenants — the closure of its Knightsbridge flagship for four weeks — has now happened, putting the retailer at risk of breaching the covenants in April 2021.

As well as the lockdown, Harrods has suffered from low footfall in central London and low numbers of foreign visitors. 

Before the coronavirus outbreak, Harrods typically hosted 80,000 daily shoppers but managing director Michael Ward said in the summer that Asian and American tourists – who account for approximately 70% of annual sales – might not be back until 2022.

At that time, Harrods cut almost 700 jobs –around 14% of its workforce – as it adapted to the changing environment.

Harrods’ latest accounts, for the year ending February 2020, revealed that profits rose 11% to £191.3m on sales that edged up to £871m.

Harrods said it had sufficient cash for the foreseeable future. However, Ward said while the fundamentals of the business were strong, recovery would be hampered if the government goes ahead with the removal of tax-free shopping.