After revealing a drop in first-half losses, the John Lewis Partnership (JLP) revealed that its transformation plan will now take two years longer than expected.
The owner of the John Lewis and Waitrose chains stated that a combination of higher costs due to inflation and a need for greater investment had hit its turnaround timetable. It was originally scheduled to have been completed in the 2025/26 financial year, with the aim of restoring profit growth following years of disappointing financial performance.
JLP made a pre-tax loss of £59.0m over 26 weeks to 29 July as it continued to face pressures from higher costs and consumer caution during the cost of living crisis. However, the group noted that its performance was improving, with the loss 41% lower than a year earlier.
Operating profit at the John Lewis department store chain fell from £295.0m to £277.1m on sales down 2% to £2.1bn. The retailer highlighted that consumers continued to spend on themselves, with sales increasing in its fashion (3%) and beauty (+2%) categories. However, they were more cautious about ‘big ticket’ items in home and tech (down 5% and 4% respectively).
At Waitrose, operating profit improved from £431.7m to £504.4m despite an £11.6m hit from IT problems which had affected product availability earlier in the year. The supermarket’s total sales rose 4% to £3.7bn, driven by an average 9% rise in prices.
Volumes slid 5% as shoppers bought less and switched to cheaper rivals. However, the group noted that volume trends improved as the half progressed following the launch of its £100m price-cutting initiative. The ‘New Lower Prices’ campaign was said to have driven product sales growth of 12% and volumes up 13% year-on-year.
The results are the first to be released since the partnership’s first Chief Executive, Nish Kankiwala, took up the role in late March. Tasked with supporting Chairman Sharon White in turning around the business, Kankiwala said the “transformation to modernise” the business was “well under way”.
He added: “There are no brands better placed than Waitrose and John Lewis to provide customers with what they need right now – to help them feel good and eat well.”
The company warned that the economic outlook remained “uncertain” but said it expected to see an improvement in its full-year financial results as it traditionally makes most of its profits during the Christmas trading period.
White concluded: “While change is never easy – and there is a long road ahead – there are reasons for optimism. Performance is improving. More customers are shopping with us. Trust in the brands and support for the Partnership model remain high.”
NAM Implications:
- ‘Waitrose total sales rose 4% to £3.7bn, driven by an average 9% rise in prices’.
- i.e. well below inflation.
- ‘Volumes slid 5% as shoppers bought less and switched to cheaper rivals’.
- Waitrose on the way back, but the gap between the two business models may need addressing.
- i.e. Why not separate the two and make them standalone entities?
