The John Lewis Partnership (JLP) has reported a return to annual profit due to higher sales in its supermarket business and cost savings, with further improvement forecasted for this year. However, its workers missed out on their bonus for the second year in a row as the group focused its investment on improving its operations.
Over the 52 weeks ending 27 January 2024, JLP delivered a profit before tax and exceptional items of £42m, an improvement of £120m compared to a £78m loss in the prior year. The group noted that it benefitted from better sales growth, gross margin rate improvement and productivity gains. Reported pre-tax profit was £56m, up from a loss of £234m.
Operating profit margins increased 1.2 percentage points after JLP achieved £111m of productivity improvements in the year. This brings the level of savings since the start of its turnaround plan in January 2021 to £420m, with the business saying it is on track to hit its target of £900m by 2027/28.
At Waitrose, sales rose 5% to £7.7bn, boosted by food inflation in its stores of 6.6%. The group claimed a record number of consumers chose to shop at the supermarket despite reports that its popularity has waned during the cost of living crisis. However, volumes were down 1.5% and its market share fell.
JLP noted trade dynamics recovered strongly through the second half of the year after Waitrose rolled out its price-cutting campaign. Volumes were said to have returned to growth in the last four months, with store transactions across the year increasing 6.8%.
The supermarket chain’s trading operating profit rose by £170m to £1.06bn, boosted by productivity programmes in its stores and supply chain.
At the John Lewis department stores, sales fell 4% to £4.8bn amid challenging trading conditions. However, operating profit improved by £13m to £689m, helped by a higher margin rate as efficiency savings across its supply chain and stores kicked in.
Despite the more positive results, JLP stated that after “careful consideration”, it would not pay its staff an annual bonus for the third time in four years. It said: “As employee-owners, we have a shared responsibility to ensure the Partnership is sustainable into the long-term. We’ve consistently said that at this point in our transformation, this is best served by investing in our retail businesses and in Partners’ base pay.”
The group noted that given the economic changes since it announced its turnaround strategy in 2020, it has refreshed its plan to modernise and improve its customer offer. This includes upping its investment programme this year to £542m, a 70% increase on the prior 12 months.
Work will focus on modernising its technology, refreshing its stores and simplifying its operations. This includes opening new Waitrose outlets in areas where the brand is underserved and refurbishing 80 existing sites over the next three years.
At John Lewis, the group plans to improve the offer with around 80 new brands and a strengthened own-label range, while overhauling its Home category. The group added that it will be improving visual merchandising in its department stores, investing in technology to enhance customer service, and driving value.
Chairman Sharon White, who is set to leave the partnership early next year, said: “We have made significant progress in the last year to return the business to profitability and delivered results that allow us to increase investment in our retail businesses; we expect profits to grow further this year.
“This shows our plan is working, while we know there’s much more to do. Our improved performance has been supported by our customers’ love for both brands, with more people choosing to shop with us than ever before, and our partners’ commitment to delivering excellent customer service.
“This year we will unashamedly focus on investing back into our retail businesses for our customers.”
Last month, press reports revealed that up to 11,000 more job cuts – 10% of its workforce – could be implemented by JLP over the next five years as part of the plan to restore long-term profitability. The partnership has admitted that its plan to become more efficient will mean job cuts, but no figure was revealed in today’s results.
NAM Implications:
- Amid 6.5% inflation…
- …Waitrose volumes were down 1.5% and its market share fell.
- Whilst trading operating profit increased by £170m to £1.06bn…
- …boosted by productivity programmes in its stores and supply chain.
- There still remains the potential impact on partner morale of another missed profit share…
- …that could impact shoppers in the aisle.
