John Lewis profits down 8.7%

You know things are bad on the high street when even John Lewis is suffering. Although, in typical style, things aren't nearly as bad as they are with its rivals.

by Emma Haslett
Last Updated: 06 Nov 2012
After yesterday’s admission by the British Retail Consortium that any growth on the high street over the past couple of months is ‘illusory’, here’s solid proof: John Lewis saw profits drop by 8.7% in the year to the end of January – its first fall in three years. Although it wasn’t necessarily all bad: sales across the group rose – at Waitrose, it was by 8.6%, while sales at its department rose by 3%.

What was going on? According to chairman Charlie Mayfield, the group’s profits were down because it ‘upped the pace of innovation and investment’. That included opening ‘more shops in a single year than ever before’ – three John Lewis stores and 29 Waitroses. It also relaunched, extending deliveries across London (which will make rival Ocado, with whom it has a 10-year agreement to deliver the supermarket’s goods, very unhappy).

So how much of John Lewis’ fall in profits is down to investment and how much is down to what Mayfield called ‘a tough year for the economy’ is difficult to ascertain. One key indicator is usually the group’s Partnership Bonus – the share of profits that goes to its 76,500 ‘partners’ (aka staff) at the end of each year. This year, it’s fallen to 14% of pay, equivalent to about seven weeks’ salary – down from the 18% they got last year.

Admittedly, that’s not exactly awful – but it does suggest even a bastion of British middle class-ness has been affected by the difficult conditions on the high street. Although it could also have something to do with the 4,400 new jobs the group created last year, which will have diluted the bonus slightly.

So despite that fall in sales, things are looking reasonably positive for John Lewis – which Mayfield seemed to agree. ‘We start this year leaner and fitter,’ he said. Unfortunately, that probably won’t be the case for its customers, if the calorie-count of some of the Delia Smith recipes being promoted by Waitrose are anything to go by…

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