Fortnum & Mason back in profit as customers return to stores

UK luxury food retailer Fortnum & Mason returned to profit last year as the end of pandemic restrictions sent shoppers back to its stores and online sales grew.

The 315-year-old group said that its online operations accounted for 40 per cent of the £187mn in revenue it generated in the 12 months that ended last July, helping to generate an operating profit of £6mn in the period.

“The world opened up again and our shops and restaurants were able to open up again, and we saw our online business hold its own”, said chief executive Tom Athron, who has led Fortnums since December 2020.

The retailer’s rebound extended into the run-up to Christmas, with footfall in its stores in the five weeks to Christmas Day up 48 per cent from the same period in 2019, before the pandemic. Online sales accounted for 50 per cent of the total during the most recent festive trading period.

However, Athron, a former John Lewis executive, cautioned that the group had not been able to escape the strains facing the UK economy. Sales of biscuits shot up 30 per cent in the festive trading period, while sales of the more expensive hampers climbed just 6 per cent.

At the same time, higher costs also held back the rebound in profits in its most recent financial year after the group recorded a loss of £2.7mn in the 12 months to July 2021, when it had revenues of £131mn.

“We’re seeing input prices on our raw materials and therefore the cost of goods sold and rising”, said Athron. “We’ve seen the same pressures on wage inflation and shortage of staff and attrition and all the rest of it that every other business has seen”.

The retailer said it expected that the coronation of King Charles III in May would be a boon for the group, whose flagship store at 181 Piccadilly is a purveyor of groceries to the King. Fortnums has other stores in travel hubs including Heathrow’s Terminal 5 and St Pancras station in London. It recently opened one in Hong Kong International Airport.

Fortnums will launch a “coronation” range of products in March, which the company predicts will be popular with international shoppers. The retailer has benefited from the return of international tourism to London after the pandemic, with the relative weakness of the pound also helping sales.

But Athron said Fortnums is also trying to build its domestic customer base, with wealthier customers buying or ordering its fresh produce more regularly, rather than going to Waitrose or Wholefoods.

“Our focus really is on becoming more relevant to people more often in the UK,” he said.

Fortnums will also begin selling products online into the EU for the first time since the UK formally left the bloc after partnering with continental retailer Trabitsch. Before Brexit EU sales accounted for “between 5 and 10 per cent” of turnover, according to the company’s chief financial officer, Justin Carmichael.

“We’ve worked out that selling from here direct to customers in the EU is incredibly complicated and the rules are applied inconsistently. The paperwork is just monumental, frankly”, said Athron.