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New John Lewis managing director ‘optimistic’ for 2017

In her first results presentation since taking on the role of managing director of John Lewis in January, Paula Nickolds played down the challenging retail environment and said she was “optimistic” about the year ahead.

“There’s no doubt that this is a challenging time in retail but we’re excited about this brand and the loyalty shoppers have for it,” Nickolds said at the John Lewis Partnership headquarters in London today. “There are tons of opportunities in physical retail and the omnichannel world.”

Nickolds confirmed that she would stick to the strategy of opening fewer stores and investing more in the existing estate: “We have three stores in the pipeline – Oxford, Cheltenham and Westfield London – but we will open fewer than we have in the past. We see stores as an important part of our total proposition. They are the fulcrum of the magic of this brand. They are sources of inspiration and experience.”

Nickolds was speaking to journalists after John Lewis revealed that sales increased 4% to £4.7bn in the 52 weeks to 28 January, but operating profit before the partnership bonus fell 7.5% to £231.4m compared with the same period last year.

During the year John Lewis opened two new stores in Chelmsford and Leeds. Leeds is the retailer’s most experience-led shop and Nickolds said they will be rolling out some of the services trialled in the Leeds branch – which include a travel agent and a beauty spa – across the store portfolio. “We need to give shoppers a reason to visit and explore the store,” said Nickolds.

Internationally, the retailer opened five shop-in-shops in Australian department store Myer during the year. It will open its largest shop-in-shop to date (15,000 sq ft) in the Robinsons department store in Dubai Festival City Mall in a few weeks’ time.

Nickolds told Drapers the development of the business’s own brand collections is “core” to the fashion strategy at John Lewis as it gives the retailer “an edge in a competitive market”. Fashion sales at John Lewis grew by 3.8% in the year to 28 January. It said this was boosted by its own-brand luxury label Modern Rarity, which launched last year.

“The success [of womenswear] underpinned the work of our in-house design teams who created Modern Rarity, which has gone from strength to strength this year. John Lewis is unique as we have the ability to combine our credible own brand offering with the energy of exclusive and international brands,” said Nickolds. Another own label launch is expected later this spring.

Defending the bonus cut

In its results today, John Lewis Partnership confirmed that employees will receive a bonus of 6% of annual salary, down from 10% last year, as the board has decided to retain more of its annual profits to strengthen its balance sheet. At the press conference, chairman Sir Charlie Mayfield insisted the business had not made the decision lightly.

“The bonus is down because the board had to ensure we had the power to invest in the success of the partnership,” he explained. “We need to take responsibility for the business. It is down to us to change the future of the business and we take that seriously, we are acting now to make sure we continue to succeed in the future.”

Mayfield said the retailer was accelerating its future-proofing strategy given the “uncertainty” of the market in the year ahead. The lead objective of the partnership is to up the rate of innovation and investment in the customer experience. The second is to create better jobs and better pay for its staff and the final focus is to strengthen its financial position.

Like-for-like sales for the first five weeks of the current financial year at John Lewis were down 1.4%. Mayfield said Easter falling three weeks later this year was to blame. He added: “We are in a position of relative strength and we anticipated the big and profound changes in the market and we are determined our strategy will work. The year ahead is uncertain, there is inflation and interest rates are volatile. We’re in a position that, whatever happens, we’ll be able to press on.”

Drapers’ verdict

Although Nickolds kept her cards close to her chest on her plans to rejuvenate John Lewis, she was making all the right noises regarding the importance of in-store experience. As shoppers continue to opt for leisure activities over retail, businesses need to give consumers a reason to visit expensive bricks-and-mortar stores rather than shopping online. However, Nickolds faces a number of challenges, including the pressure to keep up with nimble online competitors and maintain a high level of product innovation, all while attempting to boost profits in the face of rising costs. We await more detail on her strategy. 

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