If the John Lewis Partnership was a quoted company its shares might have ticked up today as its first-half losses were slashed and “significantly higher profits” are expected for the full year.
Grocery business Waitrose drove the improvement as the eponymous John Lewis department stores suffered a sales and profits fall.
Initiatives across the business have begun to bear fruit and more improvement is anticipated, and although JLP’s turnaround is far from complete, it appears that progress is being made. Here’s what you need to know following the retailer’s results.
More customers are coming to the retailer
The partnership drew 500,000 new customers in the first half, serving 23.1 million in total, and shopper satisfaction was up.
That provides reassurance that as the revival plan continues, it is on the right track as increased focus on factors including stores, product and service takes effect.
Waitrose drew more than half – 300,000 of the new shoppers. Waitrose boss James Bailey said: “Our improved performance and growth has been underpinned by significant improvements in customer satisfaction.” and said Waitrose’s “more efficient and flexible store operations” had allowed it to have more staff available in stores “when our customers need them most”.
A similar approach to shopfloor operations is being adopted at John Lewis. There, customer numbers reached 13.6 million – a 2% increase, its customer experience ratings and net promoter score also improved. However, the decline in sales of its core categories shows more needs to be done to ensure customers open their purses more readily.
The return of ‘Never Knowingly Undersold’
As the John Lewis department store division seeks to win more customers and spend, the retailer has introduced a modernised version of its famous – and famously dropped – ‘Never Knowingly Undersold’ pledge.
John Lewis boss Peter Ruis caveated his comments on the price pledge’s relaunch with a reminder that it only just happened, but said: “After a week, it’s been exceptional with some incredible sales and traffic across both big channels.”
He attributed 55,000 more organic visits daily to the John Lewis website to the reintroduction of ‘Never Knowingly Undersold’.
Ruis was confident that it would not hit the company’s profitability and said: “We’ve always had really good prices so this has just sharpened us up. We do not see a significant challenge on margin coming from this change.”
A national ad campaign starts next week to promote the price promise.
Improvements in stores and product
Both of the partnership’s divisions are investing in their stores and product.
Waitrose has just unveiled a new-look branch in London’s Finchley Road and is embarking on a drive to open 100 convenience stores over five years.
Appealing stores and products are an urgent concern at John Lewis. The discretionary nature of its main categories – beauty, fashion, home and technology – mean that, particularly when conditions are tough, it needs to carry a compelling offer in its branches.
The retailer is opening what it describes as “one of the largest beauty halls in the country” in its Oxford Street flagship, and upgrading its Cheadle and High Wycombe shops – that’s all happening next month.
Beauty has been a star perfomer, delivering sales up 7% year on year. However, fashion sales overall – of which beauty is part – were down to £508m in the half, from £527m last year.
Poor weather played a part, however, Lumina Intelligence analyst Beth Bloomfield observes: “A resurgent Marks & Spencer and steady performance at Next both indicate John Lewis is also losing ground within its fashion category.
“With many customers now flocking back to stores and both competitors on most customers’ doorsteps, one contemplates whether shuttering several stores was the right move for the department store, which is at risk of being out of sight, out of mind.”
In the home category, sales were down from £463m to £432m. It fared better in tech where sales slipped from £562m to £557m – exclusive products such as the Oura Ring have helped.
GlobalData analyst Zoe Mills said: “Notably, including Amazon electricals in its Never Knowingly Undersold price promise will strengthen its electrical performance even more, bolstering sales as we enter the golden quarter.”
Bookseller Waterstones is also opening in John Lewis Oxford Street next month, which is expected to enhance the store experience.
Christmas will be crucial
The partnership’s performance – especially that of department stores – is weighted towards the second half and golden quarter
While the pressure on consumers of inflation may be easing, trading conditions remain tough and the effects of the new government’s Budget later this year remain unknown. However, the retailer expects full-year profits to be “significantly above” last year’s £42m.
Both divisional chiefs aim to make the second half a success. Ruis said: “We made a deliberate choice to invest for the second half, which really is the John Lewis half, to drive growth, productivity and customer experience.”
Bailey expects the in-store operational efficiency change to make a difference. He said: “As a result of that hard work, we’re on course for one of the most profitable years at Waitrose for a decade.”
Leadership change underway
Exiting partnership chair Dame Sharon White made no comment on today’s results and was not at the retailer’s press briefing. After a sometimes controversial tenure, she will start handing the reins to Jason Tarry, the former Tesco UK boss who arrives at JLP on Monday.
Industry watchers believe he is likely to primarily observe the business when he begins – especially because planning for Christmas is already in place or well advanced. However, over the longer term, his arrival is expected to be a boon for JLP as it presses on with its turnaround
Bloomfield says: “Work at JLP, though headed in the right direction, is still very much in progress, with incoming chair Jason Tarry now tasked with ensuring robust sales growth in both divisions. With [new business stream] build-to-rent housing not set to drive any revenue gains in the next five or so years, JLP can not solely rely on Waitrose to lead the charge.”
Shore Capital analyst Clive Black says: “Culture, manifested in customer service and satisfaction will be key to any success. In this respect, JLP is blessed with the arrival of Jason Tarry as chair, he is just top class.”
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