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Profits almost halved at the John Lewis Partnership

Profits before bonuses, tax and exceptional items at the John Lewis Partnership – department store John Lewis & Partners and supermarket Waitrose & Partners – fell 45.4% to £160m for the year to 26 January. 

The fall was a result of significant operating profit decline at John Lewis & Partners – down 55.5% to £114.7. This was driven by weaker home sales, lower gross margin and increased IT costs. 

The group’s partners – as it calls staff – received a 3% bonus. It said this lower than usual amount would allow it to “continue debt reduction, maintain our level of investment and retains solid cash reserves”.

The John Lewis Partnership also cited the opening and running costs of two new stores, and the comparision with a large property profit made in 2017/18.

Gross sales at the partnership were up 1% for the year, to £11.7bn. Gross sales at John Lewis were up 0.7% to £4.9bn for the year, but like-for-like sales decreased by 1.4%.

Profit before partnership bonus and exceptional items at the wider group was down 37.7% to £227m.  

The relaunch of John Lewis own-brand womenswear delivered sales growth of 12.9%, as a result of new product and in-store concepts, and enhanced partner training.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, said: “In line with expectations set out in June, our Partnership profits before exceptionals have finished substantially lower in what has been a challenging year, particularly in non-food. Operating profit recovered strongly in Waitrose & Partners, up 18% (to £203.2m), mainly due to improved gross margins. However, it was down sharply, by 56% (to £114.7m), in John Lewis & Partners because of weaker home sales, gross margin pressure, higher IT costs, the property impact of new shops and lower profit on asset sales. Despite this, we managed cash tightly and reduced total net debts by £401.3m.

“This is part of our strategy to build up our cash reserves as a defence against uncertainty in the economy and to enable us to maintain annual investment at £400m-£500m per year. We have also made significant investment in our Partners during the year, particularly in leadership development, apprenticeships and pay, with our average hourly rate for non-management Partners rising to £9.16, 17.0% above the National Living Wage. We expect that average hourly rate of pay to increase by around 4.5% following our April 2019 pay review.

“While Partnership profits were down, there were several areas where we have seen performance move forward, particularly in areas where we have invested. In John Lewis & Partners the launch of our own-brand womenswear and expansion of personal styling offer has driven strong sales growth in Fashion, growing market share significantly. In addition, the investment in front line service delivered best ever customer experience ratings in John Lewis & Partners. In Waitrose & Partners, significant investment in waitrose.com, new customer smartphone apps and customer delivery services has led to a strong increase in online grocery sales of 14%, well ahead of the market, and increased online customer satisfaction.”

 

Readers' comments (5)

  • Eric Musgrave

    There are many pressures that john Lewis can do little about, but it needs to drop its "Never Knowingly Undersold" policy, no matter how precious they feel it is to "the brand". It was an admirable policy a long time ago, but in this era of crazy price-cutting by direct rivals (step forward Debs and HoF), it's commercial madness. If they dropped it and replaced it with a more neutral slogan like "Always excellent value", no consumer would think John Lewis was ripping them off. And if they did, it's a free country and they can toddle off to enjoy the "service experience" offered by HoF and Debs. I must say that in all my years of suggesting this change to JLP executives, they have told me it is unthinkable to drop "Never Knowingly Undersold". It's time to do the unthinkable.

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  • Totally agree with Eric, as long-term you cannot run a business constantly discount, constantly price matching, and taking part in Black Friday, it is madness. This is why hundreds of companies are having problems or actually folding. House of Fraser, 50% sale, for last 2 weeks, spring as only just started.

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  • In the battle of survival of the fittest JLP has perhaps done more than most to stay relevant. Where once they were almost an embarrassment in the fashion stakes they have moved forward and taken up the position once held by HOF but with a customer who shops Hairdryers to Handbags, Whistles to White Goods & Kilian to Carhartt - an end to end customer.
    Throw away the crutch of NNU - you are better than that. When you have done that and you realise we don’t just love you for what you say & bring back some more of the customer service which has been sacrificed in your quest to play in the market trading game. You WILL loose some customers but not have as many as you will win back & gain in the process.

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  • darren hoggett

    Agree with much of what had been said so far.

    JLP are much indicative of the corporate retail world in that they haven't got enough confidence in their own brand to make the right decisions and therefore stick to the status quo because nobody wants to take the blame if things go wrong.

    in JLP's case, 'Never Knowing Undersold' is millstone around their neck that should of been consigned to the dustbin years ago and it is boardroom failure that it still exists. JLP doesn't need to do it because they are under the delusion that all retail is price driven. It isn't.

    If customers don't like JLP's prices, they are free to go elsewhere. Waitrose isn't cheap, but they don't appeal to the price conscious consumers and neither should JLP. Stop trying to be all things to all people.

    Give customers quality and service and they'll come back. JLP has so much going for it, if only the board would recognise it.



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  • I never understood that tag line.

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