Staff at John Lewis Partnership may once again have missed out on their beloved bonus – for the second year in a row – but at least the famous retailer is back in the black.
The group, which owns grocer Waitrose as well as the eponymous John Lewis department store business, turned a loss of £78m in 2022/23 into pre-tax profit before exceptionals of £42m in the year just ended.
The £120m move in the right direction should go some way to restore morale at a business that has been battered in recent years.
John Lewis Partnership’s top team seems determined to convey a mood of quiet confidence after a tumultuous period.
While there is the ongoing likelihood of job losses in the years ahead, the retailer has also injected a record £116m into pay.
The long-term plan remains to diversify the business into new areas such as housing and financial services – a strategy questioned by some – but chair Sharon White declared it will now “unashamedly focus on investing back into our retail businesses”.
After fevered speculation a year ago that the retailer’s legendary partnership model was under threat as external investment was considered, this time there was much emphasis on the “self-funded” nature of improvement plans.
And the retailer intends to invest £542m this year – a 70% year-on-year uplift – in areas such as technology and store refreshes.
The lighter mood music is vital. As many chief executives know, when a business loses confidence in itself, the challenge of turnaround becomes even harder or sometimes impossible.
Employees need to feel valued and have faith in strategy to deliver on improvement ambitions. In the last few years, the Partnership has sometimes looked as if it had little confidence in the future of retail or its own business model.
Restoring a sense of confidence is on the agenda of new John Lewis boss Peter Ruis, the former brand and buying director who has just returned to the business after a decade spent at other retailers.
The department store division’s sales slipped 4% last year in contrast to a 5% advance at Waitrose, although John Lewis’ trading operating profit of £689m inched up £13m helped by efficiencies.
While reluctant to detail what he expects John Lewis to look like in a year’s time, Ruis tells Retail Week: “I think it’s all about a return of our mojo – the confidence, the innovation, the inspiration of the John Lewis department store. There’s lots of opportunities to do that.
“Retailers are eternally dissatisfied people and all of us can see many ways of improving.”
The retailer will invest in stores to cater best to customer needs and wants. Ruis says: “What you’re going to see is continued investment in real estate across multiple stores. A typical example would be doubling the size of our beauty hall, which will happen in the autumn in Oxford Street.
“Those types of interventions across our estate are happening every single month.”
Lumina Intelligence senior retail analyst Beth Bloomfield says: “Investment in John Lewis stores is key, with competitor M&S ramping up its store refurbishments as well as reporting growth in clothing and home.
“The beauty category is also a key watch-out for John Lewis, with Boots upping its game and the growing number of Sephora stores likely to divert spend.”
Waitrose is poised to open its first new shops in about a decade and Bloomfield thinks that could bring John Lewis benefits, too.
She says: “It would be a missed opportunity if the new Waitrose stores do not embrace a pan-partnership approach, presenting John Lewis ranges alongside grocery, given the reduction in store numbers and catchment at the department store arm in recent years.”
Last year, John Lewis’ fashion category, which includes beauty, performed best while the other big categories of home and technology came under pressure – a trend seen elsewhere in retail as the high cost of living took a toll.
In the current year, John Lewis will introduce approximately 80 new brands and strengthened its own-brand lines. It also reported that it would be “revitalising” home.
Ruis says there has been “a little bit of a pushback into big ticket”. He says: “We’ve had a couple of decent weeks on technology. We’ve seen some great sales of Apple, we’ve seen some uptick in furniture sales, so we are cautiously optimistic that both incoming and outgoing there’s some benefit to that lessening of inflation.”
Bloomfield observes: “John Lewis is right to review its home category with competitors such as Dunelm experiencing relatively buoyant growth as well as targeting new locations, and Ikea opening its Oxford Street store later this year, as well as bringing down its prices.
“Homeware is the heartland of John Lewis and an area it cannot afford to see in decline.”
Ruis also aims to make sure JL remains competitive on value for money. John Lewis ditched its famous Never Knowingly Undersold price pledge in 2022, replacing it with a promise to proved “everyday quality and value” across the business. The launch to great fanfare of the Anyday brand was part of that shift, although the brand was not mentioned in the latest results.
Ruis says: “We’ll continue to focus on really good opening price, which [own-brand range] Anyday is part of. You’ll see a significant amount of our proposition with that strong opening price position. Value is still at the centre of our gravity.”
He maintains: “Everyone’s first question is: why are you back? The answer is there’s so much opportunity. I’ve only been back eight weeks and each week I see more.
“This is an incredible brand and I genuinely believe we can be in a position to drive future growth.”
The cloud of uncertainty that has hovered over John Lewis may not have lifted yet, but there are signs it may be dissipating.
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