The plummeting value of the pound against the dollar following the UK’s vote to leave the European Union could become a “big issue” for John Lewis, managing director Andy Street said last night.
“It’s not clear yet how it will feed through. Genuinely it’s a big issue for us to face into next year,” Street told journalists during a dinner at the retailer’s Oxford Street flagship in London.
John Lewis has hedged its foreign exchange risk for the current financial year and has a “good proportion” of hedging in place for the first half of 2017/18, but less for the second half.
Street warned that hedging is “never quite that simple”: “You don’t know where cost inflation will come through from other things that are imported.”
Two-thirds of John Lewis products are imported, of which half are purchased in US dollars. “As an importer we need to know what the [post-Brexit] terms of trade will be,” Street said.
However, he insisted that there has been no visible impact from the vote on trading so far.
Earlier this week, John Lewis revealed its sales growth slowed in the week to July 2. Street hit out at press speculation that this was directly linked to Brexit, explaining: “We changed the start date of our clearance.”
But he added that it was “far too soon to say” what impact the vote will have on trading in the long run.
Asked if he thought there would be another recession, he said: “We don’t know. The only effect that’s clear from Brexit [so far] is the exchange rate piece. If anyone tries to tell you otherwise, they’re wrong.”
He continued: “At the moment it is a political not an economic crisis, but one could turn into the other if not properly handled.”
Street said any visible slowdown in consumer spending would be a grave concern. “Whatever people thought about this, has it actually changed behaviour? That’s what we need to see.”
He revealed that John Lewis failed to get planning permission to open a new store in Worcester, but made it clear that this had nothing to do with Brexit. Discussions to open new stores elsewhere continue, he added.
Street also revealed that the beauty halls in six key stores – including in Bluewater shopping centre in Kent and Cribbs Causeway near Bristol – have been selected to undergo a full refurbishment.
“If we are into tougher times, it’s our model, our ability to do things that are counter-cyclical and possibly even counterintuitive, that will see us through,” he concluded.