John Lewis enjoys 60% profits jump, but Olympics hit Next

The John Lewis partnership has announced bumper half-year profits across the board, but things ain't so bright for Next...

by Michael Northcott
Last Updated: 19 Aug 2013

The last few months have been turbulent for many retailers, with an uncertain economy and the effect of the Olympics hard to predict. But John Lewis has managed to pull a massive 60% rise in profits to £144.5m in the period, on sales that have also risen 8.6% to £3.9bn. This looks like the sort of wizardry that is only achieved by 'efficiency savings'. But nonetheless, the partnership, which also owns Waitrose supermarkets, said the Diamond Jubilee, the Olympics and the anniversary of last year’s VAT increase all helped boost sales and profits. Huzzah!

Break it down a little, and the picture remains rosy. The John Lewis department stores division saw like-for-like sales increase 9.2% on last year, thanks partly to all the national events, but also because of a surge in home electricals sales following the UK switchover to digital TVs. Waitrose achieved a 2.2% rise in like-for-likes by adding 50% more customers to its home delivery business, which is direct competition with Ocado for the highly lucrative market. Revenues in the division grew 6.6% to £2.6bn with a 28.9% increase in operating profit to £142m. It’s worth noting that the firm did stress that it doesn’t expect to continue this rate of growth – there are a few one-off factors in there. Nonetheless, a good first half.

For Next, the situation is not so dream-like. Today it warned investors that the Olympics and Paralympics hit sales hard. TV coverage of the games kept millions of Brits at home over the weekend watching athletes on rostra biting pieces of gold, instead of shopping for clothes. The retailer has not quantified exactly what the difference in sales is for August and September, but did say that year-on-year sales growth to date was now around 3.25% mark: in the first half of this year it was more like 4.5%. 

The results are a bit of a kick in the teeth for Next as it was doing rather well earlier in the year. For the first half of 2012, it posted profits of £245m, up 7 per cent on the previous year. Sales had also risen 5% to £1.64bn. It’s probably fair to say that the brand is enjoying an underlying acceleration during the double-dip recession, but the firm’s finance director, David Keens, added that he does not expect to recoup the lost sales. 

So a mixed bag between two high street stalwarts. At MT we suspect this may become a more common story as more Q3 results come out: finding out who has won and lost on the high street after the Olympic dust has settled… 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today