The John Lewis Partnership (JLP) said today that its plan to revive the business was working after reporting a narrowing of half-year losses.
Over the six months to 27 July, the employee-owned group recorded a pre-tax loss of £30m, down from £59m, on revenues up 2.4% to £5.2bn.
JLP has been seeking to turn its fortunes around by modernising its stores and product offering. The group returned to profit on an annual basis at the start of this year.
Chief Executive Nish Kankiwala said today that the results confirmed that “our transformation plan is working” and that the company expected “profits to grow significantly for the full year, a marked improvement from where we were two years ago”.
He added: “We continue to invest heavily in quality, service and value, and customers are responding well – with more people shopping with us and customer satisfaction increasing. While we have much more to do, we’re well set up for a positive peak trading period and on target to significantly improve our performance for the full year.”
However, the half-year figures highlighted a stark difference in the fortunes of Waitrose and John Lewis.
At Waitrose, turnover increased by 5% to £3.65bn, with volume growth of over 2%. Meanwhile, adjusted operating profit increased by £75m to £113m, and gross margin improved by 1.2 percentage points. The group noted that its supermarket business ended the half “strongly” with market share growth.
The improvement at Waitrose follows the introduction of new and improved product ranges, investment in price cuts, and tie-ups with the likes of Gail’s bakery and meal delivery service Dishpatch. The retailer also recently revealed that it was planning to open 100 more convenience stores over the next five years as part of a £1bn investment programme for new sites and refurbishments.
In contrast, it was a tough period for the John Lewis department store business after poor weather and the squeeze on consumers’ disposable income impacted demand for clothing and ‘big ticket’ items such as furniture. The chain’s turnover fell 3.3% to £1.54bn, whilst adjusted operating losses increased by £24m to £49m off the back of lower sales and an investment in its staff and technology to improve customer service.
Diana Wehrle, retail analyst at Rendle Intelligence and Insights, noted that fashion was a “key thing” for John Lewis, but it was facing challenges from rival chains. “Marks &Spencer have really upped their game,” she said.
Last week, John Lewis announced that it would bring back its 100-year-old ‘never knowingly undersold’ price promise two years after it was ditched.
Meanwhile, JLP revealed that it managed to make further savings of £78m from simplifying the business, delivering £500m in savings since January 2021 as part of a target of £900m by 2026.
Clive Black, head of consumer research at Shore Capital, said it was “pleasing to see this British retail institution out of the surgical ward and almost exiting the medical one, too”. He highlighted that the business was now “more focused” and its balance sheet “was not distressed”.
Later this month, JLP will welcome Tesco veteran Jason Tarry as its new Chairman, succeeding Sharon White after five years in charge. She led the business through the pandemic and a period of high inflation while trying to improve trading amid criticism that she lacked the retail skills to turn the business around. Tarry has been tasked with driving the next phase of its modernisation and growth, with analysts expecting him to introduce some Tesco-inspired strategies.
NAM Implications:
- Given the two different business models…
- ..and these results to match…
- …it would seem wise to consider splitting the business and allowing Waitrose and John Lewis to stand alone.
- Meanwhile, key for suppliers to ensure they achieve their fair share of sales and investment…
- …in either business.
