The John Lewis Partnership has outlined further details of its turnaround strategy which will see its two chains introduce more budget ranges, expand further online, and roll-out new services like insurance and property to restore profit growth.
Unveiling the conclusions of a strategic review that was instigated by its chairman Sharon White, the group said its five-year plan was self-funding and takes into account the current challenging trading conditions.
It is hoped the strategy will lead to profits hitting £200m in the next two years and £400m by 2025. Recent half-year results showed the group had plunged to a £635m pre-tax loss after being impacted by a £470m write-down against the value of its department store estate. It also announced that it would not pay its staff their renowned annual bonus for the first time since 1953.
The Partnership confirmed today it will restore the bonus payment once profits exceed £150m and its debt ratio falls below 4 times.
The group stated it was committing £1bn over the five years to accelerate its online business, modernise its shops, and improve customer service. However, further job cuts seem likely with the group saying it would also be aiming to save £300m per year by 2022, making its operations and head offices “simpler and more efficient”.
The Partnership outlined various initiatives and aspirations for the business. At Waitrose, it stated that will continue to emphasise value after its Essentials range saw sales rise by nearly 10% in the past six months. John Lewis will also be relaunching its Home range in the spring with the introduction of “more affordable price points”.
Meanwhile, the group stated that it will grow delivery capacity of Waitrose’s online grocery service beyond 250,000 orders per week, from 190,000 currently and up from 55,000 before the pandemic. It is also planning more partnerships like its trial with Deliveroo to reach new customers.
The group sees John Lewis becoming a 60-70% online retailer by 2025, alongside its shops. Further investment is also being made in virtual services like personal styling, home design and a Virtual Christmas shop.
The group also reaffirmed that Waitrose and John Lewis will work more closely together, in store and online. It has already made Waitrose Christmas hampers available through John Lewis and John Lewis Christmas trees will sit at the front of 300 Waitrose stores, with shoppable QR codes. Both brands plans add more local assortments that reflect where customers live.
The Partnership also confirmed it will replace its ‘Never Knowingly Undersold’ price promise, which dates back to 1929, with a new “value pledge” once customer research has been completed.
Meanwhile, the group is committing a total of £400m to grow in new areas such as financial services, housing development, horticultural, and product rentals. It revealed today that it is entering the home insurance market, whilst identifying 20 sites where the group could build social housing to rent. It is targeting 40% of its profits from the new areas by 2030.
The Partnership outlined that sustainability will also be at the core of its strategy with several carbon reduction and food waste commitments. John Lewis will introduce a ‘buy back’ or ‘take back’ solution by 2025 on all product categories, whilst key raw materials in its own brand products will be from sustainable or recycled sources.
White commented: “We’ve seen five years of change in the past five months and Waitrose and John Lewis have responded with great agility. Our plan means the John Lewis Partnership will thrive for the next century, as it has the last.”
Nina Bhatia, the group Executive Director of Strategy & Commercial Development, added: “This is a bold plan to grow our business and get us much closer to our customers. Waitrose and John Lewis are two of the country’s most trusted brands and we’ll offer the best products and customer service on the high street and online.
“We’re creating new inspirational services for customers where strong ethical values and peace of mind matter, like reusing and recycling products, personal savings and rented housing. Our plans will firmly establish Waitrose and John Lewis as the go-to brands for customers that care about quality, value, and sustainability.”
NAM Implications:
- Essentially, drive sales and cut costs.
- i.e. the more suppliers help JLP increase sales (see options above)…
- …the lower the pressure will be applied to supplier cost prices…
- …and the more negotiating power available to NAMs.
- Your call…
