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Retail

Fortnum & Mason's Performance Indicates Resilience Of Premium Positioning

By Steve Wynne-Jones
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Fortnum & Mason's Performance Indicates Resilience Of Premium Positioning

A leading retail analyst has said that the full-year performance of upmarket retailer Fortnum & Mason, which saw profits rise 26% in the full-year to July 14, indicates the resilience of trading at the upper end of the market.

Emily Salter, retail analyst at GlobalData, was commenting as Fortnum & Mason posted a 12% increase in sales, to £138 million (€161.6 million), with its Piccadilly flagship in London seeing a 6% increase.

British Identity

"Fortnum & Mason has delivered another year of strong sales growth," Salter commented. "Though total revenue was bolstered by the opening of its new Royal Exchange restaurant in November 2018, it is clear that its premium and unique products enhanced by its strong British identity resonate well with domestic shoppers and tourists, even in the tough UK trading environment."

International sales at the business were up, with sales in Japan (+28%) and Hong Kong (+16%) seeing a significant increase in performance. The group has also announced plans to open a new flagship branching Hong Kong, however Salter questioned whether the timing of such an announcement was well-planned, given the political situation in the territory.

"Though Fortnum & Mason is smart to reduce its reliance on the UK and capitalise upon international demand for British goods and the brand, it is debatable whether this is a wise move due to the protests and resulting recession that have dented the sales of premium and luxury brands in Hong Kong," she said.

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At the same time, travel sites could be a "significant channel of growth" for the brand, Salter added, with the "potential to open more locations, to capitalise upon tourists wishing to purchase last minute British gifts and souvenirs, as sales at the St Pancras store grew by 15% and its only other UK travel site is Heathrow Terminal 5".

Online Potential

Online is another potentially strong channel for the business, with Salter noting that while online revenue outperformed total growth at the business, it saw a slowdown compared to the full-year 2017/18 period.

"The retailer’s website is inspirational, especially for festive gifting, helping to boost sales, but though click & collect is free this will be inconvenient for the vast majority of shoppers given the limited number of stores, and standard home delivery is £5.95," she said. "Fortnum & Mason should reduce this cost and promote its more widely available third-party pickup option more clearly to drive further sales online, especially repeat orders."

Competitive Market

Fortnum & Mason is also not immune to competition, such as from premium department store competitors like Selfridges and Harrods, both of which have recently announced major investments in their stores.

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"Harrods has restored its Food Halls, and Selfridges has renovated numerous areas of its flagship London location to boost footfall, as well as improving the experiential elements of its store, adding restaurants and a cinema," Salter commented.

"Fortnum & Mason is able to hold its own against these players, with its mix of traditional and innovative products as well as its food service proposition, but it must ensure that it keeps up with consumer expectations of a premium experience in its flagship Piccadilly store.''

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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