After a big increase in annual earnings, the mood music at John Lewis Partnership is upbeat as it presses on with a turnaround on the back of improved profitability, productivity and cash generation
Investing for future success – from stores to AI
The Partnership, which owns grocer Waitrose, as well as John Lewis department stores, has been, and will continue, to invest to improve its customer appeal and performance.
There will be up to £600m of self-funded investment this year in areas such as store openings and refurbs, technology upgrades, and supply chain modernisation.
Such investments are already paying off. At Waitrose, for instance, Partnership finance director Andy Mounsey said that investments in the supply chain and merchandising systems has improved availability for customers and cut wastage. Waitrose also opened its first new shop in six years and more will follow.
At John Lewis, beauty halls in Oxford Street, High Wycombe and Cheadle made their debut. Beauty is a highly successful category for the department store business, and this year Bluewater, Liverpool and Solihull are next in line for similar treatment.
Both divisions are deploying AI. Waitrose has used it, for instance, to keep up with and ahead of global menu trends, while the recently relaunched Never Knowingly Undersold pledge at John Lewis is powered by AI.
Never Knowingly Undersold a ‘catalyst’ for improved John Lewis performance
Profits at the department store division were down last year, but there was evidence of success as new boss Peter Ruis seeks to reinvigorate it.
Performance ticked up strongly in the second half and peak, following the launch of the new-look Never Knowingly Undersold promise.
Ruis said: “We launched Never Knowingly Undersold in September and it proved the catalyst for our second-half turnaround. We’ve calculated incremental revenue of around £112m through higher volume and increased traffic.”
“With an additional 100,000 unpaid web visits per week through SEO and direct traffic, this has also supported a significant improvement to efficiency on our PPC [pay per click] spend.”
Ruis revealed that, helped by the new price position as well as factors such as exclusive product and store enhancements, performance in the new year has been akin to that in the second half of last. He said: “We carried on the momentum from Christmas into January and February.”
Waitrose expects ‘sustainable growth’
Boss James Bailey said Waitrose had “grown sales, volume, custom numbers and customer satisfaction” and saw no reason why that should stop.
On the back of 4.4% sales growth last year, he said: “We’re confident that’s sustainable growth, as the majority of it is coming from volume. And it is all like-for-like—we’re winning the battle for customers.”
He maintained that Waitrose’s “strategy of retailing well and focusing on what makes us different is paying off”. In evidence, he pointed out that own brand is up almost 6% year on year and, since relaunch in September, the premium number Waitrose No1 has performed well—up approximately 40% in the fourth quarter alone.
He said: “We’re not complacent. We’ll continue to work hard for our customers, and we believe the best is yet to come.”
More customers - and more loyalty scheme members
The Partnership reported that customer numbers rose 2% over the year when there was also good take-up of its loyalty schemes.
The number of active My Waitrose members was up by 7% to 4.6 million, and My John Lewis achieved an 11% uplift to 3.7 million.
There have been ambitions for some time to develop a new, probably pan-partnership scheme, but there was no news about that in the results.
Chair Jason Tarry said the success of the existing two schemes “point to the fact that we’re making sure we’re relevant for the customers and missions within those brands, which is really pleasing”.
He said: “Undoubtedly, there’s an opportunity for us to think about our partnership in total and leveraging across our brands. That is something that we’re working on right now and there’ll be more news later.”
New chair Jason Tarry’s initial take
Former Tesco UK and Ireland supremo took up his role last September, so this was the first set of full-year results that he has presented.
Tarry told Retail Week: “It’s been a really interesting and fantastic first six months…what I definitely see in both brands is a lot of headroom, because there is quite a lot of catch-up of investment still to do in our store estate, in our supply chains, in our technology roadmap and in our efficiency work. That’s what actually gives me great confidence.”
He said: “There’s lots to be positive about. But I also have to say, to get us to this point—it’s been really hard won. It’s good to see that the hard work is starting to pay off in terms of our performance and gives us some encouragement for more.”
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