John Lewis and Waitrose may be among the most beloved brands on the British high street, but even they aren’t immune to the recent ravages of the retail sector. Profits at the employee-owned retailer have tumbled as rising pension costs and the supermarket price war take their toll.
John Lewis Partnership’s first half pre-tax profits before exceptional items (great tongue twister) fell 26% to £96.7m. This was blamed on profits made on property last year and the aforementioned pension charges, which resulted ‘from volatility in the market driven assumptions’ (we assume that means the wild gyrations in global stock markets of late).
That means an extra pension pile-on of about £60m for the full year, it said, meaning full-year profits will be somewhere in the region of £270m-£320m, compared to £342.7m. Ouch.
But how are things actually going on the ground? The Partnership’s revenues edged up 1.9% to £4.5bn. But while John Lewis’ like-for-like sales rose 3% to £1.9bn, Waitrose’s slipped 1.3% to £3.2bn. Even as it has been steadily gaining market share, the middle classes’ favourite supermarket hasn’t been immune to the scourge of the discounters - although its operating profits excluding property did sneak up 0.6% to £135.5m and it does look decidely healthier than, say, Morrisons.
Online, things don’t look much better for the grocer: gross sales fell 13%. It blamed that on ‘a strong promotion-driven performance last year’ – but a stellar year isn’t much use if it isn’t sustainable. John Lewis, on the other hand, grew its online sales 17.1%.
So all in all a mixed picture from a business that has been wont to crow about how its employee-ownership model has insulated it from much of the turmoil on the high street. In the end, even that couldn’t shelter it from stock market and supermarket storms forever.