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John Lewis Christmas sales clouded by staff bonus warning

John Lewis Partnership has reported positive Christmas results, but warned that its full-year staff bonus is likely to be “significantly lower” than last year due to external pressures on trading.

Total sales at the John Lewis Partnership, including Waitrose, were up 4.9% year on year to £1.91bn for the six weeks to 31 December.

Excluding Waitrose, gross sales at John Lewis increased by 4.9% to £998.1m during the period, aided by a strong performance in fashion – up 7.2%. Across all categories, like-for-like sales were up 2.7%.

The six-week period included an additional trading day in shop, compared to last year’s six week period to 2 January 2016. Excluding the additional trading day, like-for-like sales at John Lewis were up by an estimated 2%.

Online sales grew 11.8% during the period, representing 40% of sales. Shop sales were up 0.8%.

Click-and-collect sales were up 14.5%, accounting for 52% of online orders.

Profit before the partnership bonus, tax and exceptional items for the year ending 28 January 2017 is expected to be up on last year, as lower pension accounting charges offset trading pressures.

However, the business warned that bonuses would likely be “significantly lower” than last year, given the “challenging market outlook” and need for investment in the future.

The partnership board will decide on the level of bonus in March.

John Lewis Partnership chairman Charlie Mayfield said: “We traded strongly over Christmas with sales up nearly 5% and both Waitrose and John Lewis grew market share. Sales were particularly strong in the areas that have been the focus for product innovation this year, such as our Waitrose 1 premium range and John Lewis own-brand fashion.

“Our multi-channel capability has again proved its worth with online accounting for 40% of total sales in John Lewis.

“Operational performance was good across both brands. As a result we sustained a strong sales performance right through to Christmas and enabled a great start post Christmas, including clearance.

“However, although we expect to report profits up on last year, trading profit under pressure. This reflects the greater changes taking place across the retail sector. We expect those to quicken, especially in the next 12 months as the effects of weaker sterling feed through.

“We will now accelerate aspects of our strategy. This will involve a period of significant change, investment and innovation to ensure the partnership’s success.”

We have decided to comment on Bonus implications at this stage because the Partnership’s strong Christmas trading, and the likelihood of higher reported profits, risk overshadowing the importance the Board is placing on the challenging market outlook, our determination to maintain a strong balance sheet and our commitment to accelerating our strategy.08:27

The business added: ”Trading profit is under pressure as a result of wider changes taking place in retail. The most obvious of these changes is the channel shift from shops to online. The other major influence is pricing, where deflation continues in food and non-food, despite rising input costs as a result of weakness in the sterling exchange rate. These factors are significant for the outlook where we expect both inflationary cost pressures and competition to intensify in the market as a whole. The rate of retail market sales growth may slow and the rate of profit growth that is achievable will be affected by margin pressure.”

 

 

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