Sir Charlie Mayfield, chairman of John Lewis Partnership, said the business will continue to invest and “step up” to the challenging market, as restructuring and redundancy costs hit full-year profits at the group.
Restructuring and redundancy costs at the business totalled £72.8m for the year. In February 2017 John Lewis placed 773 members of staff in consultation as part of a restructuring. It created 386 new jobs for those affected, resulting in a total reduction of 387 jobs.
Gross sales at the partnership were up 2% for the year, and partners received bonuses of 5% of their salaries, totalling £74m.
Speaking today at a press conference following the results announcement Mayfield said that last year had been “challenging as anticipated”, and added that 2018 would be no easier: “Trading will continue to be volatile, and there will be no let up from the competition.”
He added that the business needed to face the difficult environment head on: “We expect there to be continuing pressure on profits. This is no time for a defensive crouch. Our game plan is to step up to these challenges – that’s the only way to win.
“Our level of investment is 20% higher on average than our competitors. Last year was about heavy lifting. Internally this year, we will focus more on the customer and on innovation.”
Mayfield said the business has 5% fewer members of staff than it had last year, and he expects this to drop further: “These numbers will continue to decline. We’re moving staff onto longer contracted hours, so there will be fewer people, but they will be working longer. We’re also investing in staff and developing their careers. “
He added: “Technology is another factor that will affect the workplace, and it isn’t being factored in by a lot of other retailers. The level of displacement in the workplace is greater than we’ve ever seen before, so we’re trying to prepare for that.”
Lower gross margins at Waitrose – driven primarily by weaker sterling – contributed to a 21.9% drop in profits before partnership bonus, tax and exceptional items at the wider group to £289.2m.
However, John Lewis fared better. Gross sales at the department store were up 2.2% to £4.8bn for the year, while operating profit before exceptional items was up 4.5% to £254.2m. Like-for-like sales edged up by 0.4%.
Managing director Paula Nickolds said John Lewis had a “strong performance in very challenging conditions”: “We outperformed the market and increased market share in all three departments [fashion, home and electricals]. We aim to delight and inspire with our in-store experience. Shoppers are looking to do everything in store. It was a strong year for John Lewis against a backdrop that is anything but benign.”
Fashion sales at the retailer were up 3.2%, boosted by a “particularly strong” performance across womenswear, which was up 5%. Own-brand womenswear was up 15% on the year to January 2017.
Own-brand and exclusive product now accounts for 35% of the fashion sales mix, and John Lewis wants to boost this to 50%.
To grow and develop the own-brand offer, John Lewis is recruiting for 80 new roles across its design and buying departments.