John Lewis streets ahead

It might be carnage on the high street, but John Lewis seems to have come through 2007 with flying colours...

Last Updated: 06 Nov 2012

The John Lewis Partnership, which also includes posh supermarket Waitrose, said today that pre-tax profits for 2007 were up 18.7% to £379.8m. Despite the ‘challenging trading environment’, it still managed to shift £6.8bn of stock – which means that the annual Partnership Bonus (the pool of cash to be divided up among the company’s 69,000 staff) has shot up to £181m. That’s 18% higher than last year, and amounts to 10 weeks’ extra pay for every single employee. Nice work if you can get it.

Waitrose was probably the star of the show. Sales were up 6.8% to £4.0bn, while operating profits soared an impressive 22% to £212m. It now has a market share of just under 4%, but although it’s still well below the Big Four in size terms, its profit margins are the envy of the industry. That’s largely because it tends to stock the higher-end, higher-margin products, like organic food and Fairtrade coffee, while customers seem happy to pay a premium for the quality of its produce (which have won another clutch of awards this year). And thanks to its stake in Ocado, it’s also got a big share of the online grocery market (around 20%, it reckons).

The department store John Lewis was no slouch either. Sales were up nearly 6% to £2.8bn, with operating profit up 12% to £190m. It seems to have outperformed its rivals in a falling market (always a good trick), with electricals like flat-screen TVs and computers among the biggest sellers. It’s also selling more of its higher-margin own-brand stuff, while even website John Lewis Direct appears to be gathering some momentum. The 'Never Knowingly Undersold' slogan clearly has a reassuring effect on customers - even if it doesn't amount to much of a guarantee of anything, when you come to think about it...

The big question is: can JL repeat the trick in 2008? It certainly found the going tougher in the second half of last year (although it still managed sales growth of more than 5% during the period). And the signs are that this half-year will be even tougher – sales are currently just 2% up on last year. ‘We expect trading conditions to be very challenging this year as consumers continue to respond to concerns about the housing market, higher food and energy costs and tighter credit conditions’, chairman Charlie Mayfield intoned solemnly today.

On the other hand Waitrose still appears to be going great guns, with sales so far up 8% on last year. Clearly the prospect of imminent economic meltdown hasn’t stopped Britain’s middle classes from stocking up on their smoked salmon and brioche...

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