It hasn’t been an easy six months for the John Lewis Partnership, which reported its results for the half-year to 1 August this morning. Group pre-tax profits tumbled 20% to £86m (bad news for the partners’ bonuses), thanks largely to a painful 5% fall in like-for-like sales at the department store. In fact, these figures would have looked a lot worse had it not been for a sterling display by Waitrose, which increased sales and profits – much to the surprise of many (us included) who thought its premium offering might struggle in the downturn. And with sales apparently picking up in recent months, it does at least look like the worst may be over…
Chairman Charlie Mayfield was putting a brave face on things this morning, suggesting that a jump in one-off costs and capital spending made these figures look worse than they actually are. But it’s clear that times have been tough for the department store. That big fall in sales sent operating profits plunging over 50% to £21m (on sales of £1.2bn, which is a pretty measly margin). Although it’s apparently been gaining market share in fashion and electricals, homeware sales were down over 8%. John Lewis blamed this on the decline in the housing market – but that hasn’t stopped B&Q owner Kingfisher hiking profits by a third, and talking about a new passion for home improvements (‘DIY is cool again,’ B&Q boss Ian Cheshire claimed today, which seems questionable on all sorts of levels).
Fortunately for JLP, it was a much happier picture at Waitrose, where operating profits were up nearly 16%. At the start of the recession, Waitrose’s pricey offering was seen as being very vulnerable to the likes of Aldi and Lidl, but it clearly hasn’t worked out like that. In part, this is because it’s adopted the ‘if you can’t beat ’em, join ’em’ principle, introducing an Essentials range of cheap everyday staples that has gone down a storm. But at the other end of the spectrum, it’s still shifting premium products to those who can afford it: its new ‘Seriously’ brand has got off to a good start, while it expects big things of its new ‘Duchy Originals from Waitrose’ range. Its free delivery (via the wholly-owned WaitroseDeliver, as opposed to the part-owned Ocado – still a bizarre set-up) has also proved popular.
Better still, business does seem to be picking up across the group. Mayfield said that sales had been flat in the first quarter but up 7% in the second – and they’re up 6.2% in the six weeks since (with Waitrose again doing particularly well). This shows the Partnership’s various initiatives to reposition the business are bearing fruit, he reckons. Of course, John Lewis also has the benefit of being Britain’s most trusted retailer – so we wouldn’t be surprised if things do pick up in the second half.
But it's going to be a difficult period. Official figures out this morning show that the high street recovery seems to have fizzled out, with retail sales flat between July and August. So retailers are going to work very hard to keep their top line growing...
In today's bulletin:
John Lewis puts on a brave face as sales slump
Business face post chaos as Royal Mail strike looms
Editor's blog: Poor old Kodak's fall from grace
Burberry needs a little help from its (online) friends
Will recovery be harder than recession for SMEs?