Harvey Nichols to Expand in Private Label as Sales Growth Slows

Harvey Nichols Group Ltd., the luxury department-store chain, will create a private-label collection of women’s items and expand online in a bid to stave off a slowdown in revenue growth since January discounts.

“We are quietly confident that with this in place we can continue sustainable growth despite a very poor market outlook,” Chief Executive Officer Joseph Wan said in an interview. Same-store sales growth slipped to 3 percent since February from 7 percent to 8 percent in the last nine months of 2010, he said. “Things are clearly weakening quite rapidly.”

Harvey Nichols, bought by Hong Kong businessman Dickson Poon in 2003, plans to “aggressively” develop an own-label range including women’s shoes and small leather goods for the winter season, Wan said. The brand will be introduced slowly, building on the range of men’s shirts and suits already sold. Quality will be comparable to the “top brands” but at a price 15 percent lower, he said.

The move follows other luxury-department stores including Harrod’s Ltd. in expanding private-label ranges as luxury brands like Burberry Group Plc and Prada SpA reduce their dependence on third-party distributors. With lower prices than mainstream luxury brands, retailers’ labels can appeal to customers who are more price sensitive.

U.K. consumer confidence fell to a record low in February as Britons grew more pessimistic about the sustainability of the economic recovery and the outlook for jobs, according to Nationwide Building Society.

‘Feel-Good Factor’

Customers are still shopping but the “feel-good factor” has gone with people splashing out less, according to Wan. Sales of fine wine have fallen, with fewer than 10 bottles of 2,000- pound 1982 Chateau Margaux wine sold last year at the store’s Oxo Tower restaurant. Prior to the collapse of Lehman Brothers Holding Inc. in 2008, the retailer sold that many each month.

The privately held company is buying more lower-priced so- called diffusion lines from popular brands like PPR SA’s Alexander McQueen’s “McQ” range and Chloe’s “See by Chloe” line to attract a newer customer base, the CEO said. A canvas tote bag from See by Chloe sells for 70 pounds ($114), compared to a leather version for around 1,000 pounds available on other retailer’s websites.

Premium luxury collections also being added to the company’s selection, including Lana Marks, the U.S. maker of baby alligator handbags, which sell for more than 50,000 pounds per piece.

Revenue at Harvey Nichols’ online store will double as it adds more expensive items to the site. New stores in Hong Kong at the Pacific Place mall in 2011 and in Kuwait City in 2012 will also help drive growth, the executive said.

Harvey Nichols, founded in 1813 and sold for 137.5 million pounds in 2003, has a flagship store in London’s exclusive Knightsbridge area as well as outlets in Bristol, Manchester, Edinburgh, Birmingham and Leeds and the Oxo Tower and Prism restaurants in London. It also has stores in Dublin, Hong Kong, Dubai, Saudi Arabia, Turkey and Indonesia.

Upheavel in the Middle East is having no impact on its stores in Riyadh, Saudi Arabia and Dubai, Wan added.

“So far nothing has pulled back our overseas opening program,” he said. The retailer is in talks about opening another three stores in “emerging markets.”

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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