Source: Fortnum & Mason

The consolidated delivery network would improve ‘customer experience’ and reduce complexity, said CEO Tom Athron

Fortnum & Mason is to double the capacity of its warehouse network, and expand its fresh food offer after increased demand helped the 317-year-old grocer post strong annual results.

Turnover grew 12% to £208.6m (from £186.5m) in the year to July 2023, according to accounts published on Thursday. Sales grew 34%, during the period that included the coronation of King Charles, and saw the reopening of its experience-led third floor at its Piccadilly flagship store. Pre-tax profits grew 23% to £7.5m as a result. Online sales fell by 11% as shoppers favoured in-store experiences, yet still accounted for 36% of all sales.

Despite an initially slow start, Christmas sales – which Fortnum’s publishes alongside its annual results – were also strong. They grew 17% in the five weeks to 24 December, with the retailer seeing “record” numbers in stores and online.

However, the company struggled to meet the spike in demand, leading to complaints from some shoppers over difficulties in ordering its famous hampers and other products, The Guardian reported. Fortnum’s also restricted the online sales of some popular festive lines until after Christmas Day, with customer service agents telling shoppers that the grocer had reached “capacity”. 

“It’s fair to say that Christmas came very late, and a very specific spike does test our infrastructure to the limit,” Fortnum & Mason CEO Tom Athron told The Grocer. “In direct response to that, we are consolidating our activity into one location, which I think will provide a much better experience to our customers.”

The move – which was approved by company execs months ago – will see Fortnum’s relocate several of its distribution centres in Ely and Northampton to a single consolidated site in Corby, which will be run by its logistics partner IForce. The move would “effectively double” the company’s combined warehouse footprint under one roof, Athron said.

It would enable Fortnum’s to keep a better eye on stock levels and reduce complexity by combining ambient and fresh supply chains into one network, he added.

Elements of Fortnum’s supply chain remained a “highly manual” operation, and the new site would enable the opportunity to invest in more automation and machinery in the future, Athron said.

F&M would begin moving stock in February, with the aim of the site being up and running by Easter.

Investment in food to go

Despite recent improvements in the rate of food and goods inflation, Athron remained “cautious” about 2024, as pressures from wage inflation, and the impact of high interest rates, remain. The King’s coronation in May had also given the business a significant “bump”, which would be annualised over the next year.

The year-on-year rate of food inflation had fallen slightly and was now running at roughly 5% across the business. Fortnum’s had worked to absorb “as much as we possibly can”, Athron said, but had had to pass on some prices to customers. The business had seen some margin compression as a result, he added. 

However, he categorically ruled out any prospect of introducing any form of “value, better, best” product tiering, insisting that Fortnum’s would instead continue to invest in ensuring its food was “unapologetically” the best on the market, and “justified” the Fortnum & Mason label.

A significant area of this focus would be on improving Fortnum’s fresh and food to go options, he said. The products are only offered at its Piccadilly store but demand had grown significantly over the past year, which Fortnum’s credited partly to the impact of working from home.

Fortnum’s launched a Breakfast Box delivery service in January 2023, and had seen demand increase by 320% over the Christmas period. Demand for in-store made bagels from its Bagel Bar, which launched in October, had also been strong.

The expansion efforts would focus on improving the range and quality of Fortnum’s fresh offer, including with the launch of new sausages made in store, and the addition of new products to its handmade pasta range. Steak boxes and other types of meal boxes were also under consideration, Athron said.