John Lewis stages turnaround - as UK retail sales slump again

John Lewis bounces back with some impressive six-month results. If only the rest of the retail sector looked as healthy.

by MT Staff
Last Updated: 19 Aug 2013
If there's trouble brewing in the retail sector, somebody forgot to tell John Lewis. The group, which incorporates the department store and posh supermarket Waitrose, said its pre-tax profits jumped 28% to £110m in the six months to July 31, boosted by new fashion lines, some impressive television sales, and a pair of celebrity chefs. Unfortunately, John Lewis may be the exception rather than the norm: the Office for National Statistics said today that retail sales fell in August for the first time in six months, down 0.5%. As an indicator of the UK's economic health, that's not great...
 
Never mind the supermarkets and electrical chains: when it came to World Cup tellies, Britain’s consumers were clearly determined to buy from John Lewis. The chain's half-yearly results showed that summer TV sales helped operating profits across its department stores to jump by more than three-quarters. That's an impressive turnaround for a store that, this time last year, saw its profits drop by more than half because consumers were unwilling to splash out on big-ticket items.
 
Waitrose also continues to steam ahead. Sales were up more than 11%, beating the market average of 3% by miles. And it's been winning customers both online (with sales at Waitrose.com up by more than a half) and offline, with its Delia and Heston ad campaign apparently delivering an extra 370,000 in its first eight weeks alone. Talk about cooking on gas.
 
Sadly, as today's ONS data show, lots of other UK retailers are having a much tougher time. Take B&Q, which said today that like-for-like sales dropped by 3.7%, to £2.3bn in the six months to July (although cost-cutting measures helped it boost profits by a very healthy 16%, and parent company Kingfisher fared slightly better overall).
 
Just yesterday, Next boss Simon Wolfson warned that the next few years look like being a hard slog for retailers. And with VAT rises due in January, as well as those October spending cuts (which are likely to give consumers significantly emptier pockets), there's certainly no sign of things improving any time soon. Even all-conquering John Lewis is nervous: chairman Charlie Mayfield said today that although the group had traded ‘well ahead of expectations’, he was expecting some ‘economic headwinds’ to blow his way in the coming months.
 
Nonetheless – let's not lose sight of the fact that these are extremely impressive results from John Lewis, in a very tough climate. Mayfield and co have had a great recession. Another argument in favour of the employee ownership model?

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