John Lewis Partnership: where should the new executive team focus?

The appointment of former Tesco UK chief executive Jason Tarry to the role of chair from September has been hailed as a coup for John Lewis Partnership, fuelling the optimism sparked by the return of Peter Ruis to the business in February.

Having been left behind as the pace of change in retail accelerates, there’s a renewed confidence that the partnership can accelerate its turnaround with a strengthened team and retail veteran at the helm. However, the list is long when it comes to the areas of the business that require focus.

Behind on growth

For the past two years, the John Lewis Partnership has dropped down Retail Week’s UK Top 30 retailer rankings.

Last year, for the first time, sales at a resurgent M&S exceeded those at the partnership, leading to a switch of positions in the ranking. Our latest forecasts with Retail Navigator anticipate that JLP will fall a further place to become the ninth largest retailer by 2027, based on its performance to date.

Latest results for JLP improved on the 2.8% sales decline and losses of 2022, but there is still more work to do. For the year to January 27, 2024 (FY2023), revenue was up 2.4% to £10.8bn, driven by a 5.8% increase at Waitrose, which accounts for more than two thirds of the group total. Trading operating profit reached £639m at John Lewis and £1.06bn at Waitrose.

While it’s certainly an improvement, the performance is lacklustre when contrasted with other grocers, such as Tesco, which this week announced a 7.7% revenue increase in the UK and ROI for the last year, and a 15.7% jump in operating profit.

The partnership’s department store division’s sales fell 3.7% in 2023, impacted by weaker trading in the home and technology categories, even as fashion and beauty sales improved.

As incoming chair Jason Tarry will be well aware, this performance could be better for both brands and there is plenty of work to do as retail becomes the central focus again.

Re-focus on retail

One of the first priorities for the executive team will be putting the emphasis firmly back on retail, following the recent distractions of non-retail revenue generation and questions about possible external investment. His appointment announcement said Tarry will “champion” the partnership model.

Most significantly, Tarry brings invaluable grocery knowledge and expertise to Waitrose, which brings in two-thirds of JLP revenue. Expect a big initial focus on getting Waitrose into shape to deliver increased sales and profits, boosting JLP as a whole and supporting the rest of the business with its transformation plans.

Here we might anticipate some learnings from Tesco, which has successfully held its leading market share and fought off the discounters with its three-pronged Aldi Price Match, Low Everyday Prices and Clubcard Prices strategy. Plus, under Tarry’s leadership, Tesco UK did not shy away from streamlining its store management and head office operations to drive a highly efficient business fit for the future.

Price, loyalty and product innovation

The cost-of-living crisis has been a difficult trading environment, with both John Lewis and Waitrose perceived by customers as premium and therefore expensive. Investment in price has been forthcoming albeit much later and arguably less visibly than at its competitors.

Last year’s 1.5% volume decline at Waitrose reflects this challenge, despite the £100m investment in two major rounds of price cuts. Converting top-up shoppers to higher basket sizes should be job number one.

Waitrose could potentially go faster with price investment to reset customer perception, particularly as lower inflation begins to unlock opportunities to win back more shoppers.

But at John Lewis, there is more work to be done on the everyday ‘quality and value’ strategy, underpinned by a £500m investment and the ‘For all life’s moments’ tagline – which has failed to resonate with customers in the same way as its iconic Never Knowingly Undersold predecessor.

The good news is that John Lewis served a record 13.4 million customers in 2023 and that presents a huge opportunity to build and grow loyalty, as it continues to invest in overhauling and merging the John Lewis and My Waitrose membership schemes.

Investment in stores

Reinvigorating stores is already at the heart of John Lewis’s turnaround strategy and the new executive team brings plenty of expertise. There is ample opportunity for two brands that have always been valued by customers for curation, in-store execution and focus on customer service.

There are already 160 planned improvements at John Lewis for the first half of this year. In the second half of the year, it will double the size of its beauty hall in Oxford Street, driving new footfall and giving this tired flagship a much-needed boost.

Meanwhile, Waitrose plans to open its first branches in six years this year to infill areas where it is currently underserved is another positive move to build on.

Long valued by customers for in-store inspiration and execution, both John Lewis and Waitrose would benefit from as much investment as possible to regain their former magic and reputation for brilliant customer service.

Many customers still mourn the closure of John Lewis branches, and although smaller format locations have in the past been mooted and trialled, it feels like there may more to be gain from revisiting this opportunity.

Delighting customers

A Facebook outcry was sparked recently in my hometown when the local Waitrose expanded its self-checkout zone. It came from a large and vocal group of customers who valued the store staff and “knew them all personally”. Such a level of affection from customers is a great asset for the partnership to leverage.

Its Perspectives customer research programme – and the ongoing expansion of its data and insights team bringing fresh insight into shopping habits and opportunities – will be crucial to reshaping JLP. Progress from this project is already beginning to filter through, with a greater degree of personalisation in customer communication and on the John Lewis website, but there is plenty more opportunity.

Product innovation is another area where investment should be prioritised. Despite the addition of some new food products, including its Japan Menyu Asian-inspired range, Waitrose has fallen behind M&S with its ranges including Eat Well, Dine In, the Zoe gut health partnership and Remarkable Value campaign.

At John Lewis, the discovery of exciting new fashion brands appears to have dropped off, with M&S and Next taking on this mantle. There is opportunity here to build back partnerships and strengthen important categories such as beauty, home and technology, where customers trust and appreciate the partnership’s quality and service.

Operational excellence and efficiency

The partnership announced a 70% uplift in technology and store investment for 2024, to £542m, and has injected £116m into pay.

This is a brilliant boost, but more investment will be needed in technology, supply chain and stores to bring both brands to where they need to be. That will likely include resolving the supply chain challenges at Waitrose, and unifying insight from stores and online to further personalise the customer experience.

The Save to Invest efficiency progamme has been a key pillar at Tesco and some of that thinking can be expected to filter through to the partnership with Tarry at the helm.

Restoring its mojo

In summary, there is a lot of work to do at JLP but the momentum feels strong. Leveraging Tarry’s expertise to unlock growth at Waitrose feels like the biggest opportunity, as investment there will drive profit to invest across both brands.

It is an exciting time for the partnership, and customers and Partners alike will look forward to seeing progress in the coming months.