John Lewis sales improve but profits remain muted
John Lewis Partnership’s half-year report on Thursday showed an improvement on the prior-year period but its results were still far below some of the figures it produced just a few years ago.
For the first six months of the year, its profit before exceptional items was £69 million. That was £124 million up on the 2020/21 year, when the Partnership made a loss of £55 million.
On a two-year comparison (2YoY) against the pre-pandenic period, it also showed an improvement as the first half of 2019/20 had seen it making a loss of £52 million.
It was helped by the cost reductions it has been driving through and it made savings of £66 million in the first half, as well as receiving business rates relief of £58 million.
But while that rates relief boosted it artificially, it also faced exceptional costs of £98 million in the half as it settled lease obligations due to shop closures and dealt with major redundancy costs.
JLP said that including these exceptional items, the Partnership made a loss before tax of £29 million. This was a “significant improvement” on last year’s loss before tax of £635 million, which was dominated by a write-down in the value of John Lewis stores.
However, on that basis, the result was significantly down from the 2019/20 profit before tax of £192 million, although that was inflated because of a one-off gain from the closure of the defined benefit pension scheme.
It saw a 6% increase in sales across the Partnership (but gave no monetary figures) and the John Lewis department stores chain and its associated webstore saw “strong sales growth” in the first half, up 12% on last year (and up 13% like-for-like). This was slightly up (by 1%) on 2019/20 but was 11% higher like-for-like. Almost 75% of sales were online in the first half, broadly the same as last year, and significantly up on the pre-pandemic 40%.
Margins also “rebounded strongly against last year as we returned to a more balanced pattern of trade”, it said. That meant it shifted “fewer laptops, [but saw] more lamps and linen sales”. In fact, Technology sales were flat year-on-year while growth was strong in Home (up 23%), Fashion (up 22%) and Nursery (up 18%).
But there are still challenges. Compared to 2019/20, margins were “subdued as sales in lower-margin categories remained higher than before the pandemic and inflationary pressures in global freight pushed up costs”. The company also said “customers are returning to stores typically for larger, more considered purchases and ‘take with you’ items, but so far not in the same numbers as before the pandemic”.
And for the period that its shops were open this year, like-for-like sales compared to two years ago were around 20% lower. City centres were harder hit than retail parks and standalone stores.
Looking at Waitrose, the supermarkets saw 2% sales growth (like-for-like was up 4%) on last year and sales were up 10% on 2019/20.
While Waitrose may not seem relevant to anyone outside of the food sector, the fact that the firm is more closely aligning its two brands is key. All general merchandise sold in Waitrose will be sourced by John Lewis in time for Christmas. Some 17 Waitrose stores already have a dedicated, redesigned John Lewis space, and that number will be approximately 40 by the end of the year. “Sales in these stores are higher and customer reaction has been very positive,” it said.
For the second half, the company has plenty going on with the extension of its Anyday value line into adults’ and kids’ fashion, and it’s relaunching the MyJL app to improve rewards for customers. It’s also adding more of those John Lewis spaces in Waitrose stores and will open 10 new Christmas emporiums (one-stop Christmas shops offering inspirational experiences, including in-store events and workshops) in John Lewis branches.
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