John Lewis Partnership half-year losses mount

Profits, before bonus, tax, exceptionals and IFRS 16, rose by £14.1m to £110.1m at Waitrose; however, John Lewis’ losses mounted to £61.8m, which it said reflected lower sales in categories with more considered purchasing, cost inflation well ahead of sales growth and higher IT costs.

John Lewis said “subdued consumer confidence” had hit home and electricals sales and led to it increasing marketing costs as it responded to soft consumer demand.

Sister retailer Waitrose also unveiled that it had “decided not to pursue” the partnership with Today Development Partners (TDP) it unveiled in May following Ocado unveiling its grocery tie-up with Marks & Spencer.

The grocer, which said in May that it planned to treble the size of its online grocery business to £1bn over the next three years, said it would now scale up its ecommerce arm “utilising existing expertise across the Partnership.”

John Lewis Partnership outgoing chairman Sir Charlie Mayfield said: “The re-drawing of the UK retail landscape continues apace. While trading conditions have continued to be difficult, we have accelerated our differentiation strategy and significantly strengthened our balance sheet.

“As we continue with our strategy to compete through differentiation, not scale, we have maintained investment in partners and innovation, despite profit pressures, and have seen encouraging results in several areas.”

He pointed to the sales growth in fashion and beauty, where it has grown market share “significantly” as customers responded to its investment in own-brand redesign, new brands, and personalised shopping experiences.

Mayfield said it was a “good trading performance” at Waitrose, which suffered a marginal decline in like-for-like sales. Gross margins improved at the supermarket chain.

He said JLP would continue to invest in areas such as Waitrose Unpacked, its plastic-free store, and would revamp menswear and homewares at John Lewis.

The partnership will also accelerate its transformation to deliver innovation faster and increase the emphasis on the “competitive difference” of its partners.

Mayfield said: “The structural changes in retail remain a challenge and an opportunity. Excess capacity of physical space coupled with subdued consumer confidence are adding to sales and margin pressure. In addition, a number of key operational costs continue to grow ahead of inflation.

“Our response is to build brands which remain consistently appealing to our customers so that we create more differentiated, valuable and long-term relationships with them. We continue to innovate in the products and services that we offer.

“Alongside this we are challenging and empowering partners to seize opportunities to create significantly more value for our business.”

Brexit warning

Mayfield warned about the consequences of a no-deal Brexit.

He said: “Should the UK leave the EU without a deal, we expect the effect to be significant and it will not be possible to mitigate that impact. In readiness, we have ensured our financial resilience and taken steps to increase our foreign currency hedging, to build stock where that is sensible, and to improve customs readiness.

“However, Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period.”