John Lewis losses grow, launches bigger costs-savings drive
When a results release starts with a message to the staff talking about “another very tough year”, you know it’s not going to be good and so it was with John Lewis Partnership on Thursday.
Fresh from announcing a new turnaround-focused CEO with a strong private equity background, the employee-owned business reports unaudited results for the year to 28 January that didn’t make easy reading. And it also warned of job cuts to come, although there are no details of how many at the moment.
Total Partnership sales fell 2% to £12.25 billion in a year in which inflation reached double-digits, making that decline worse than it looks the surface.
The John Lewis chain’s sales managed to rise, but by only 0.2% to reach £4.94 billion, although the aforementioned inflation would have cancelled that out. And Waitrose supermarket sales fell 3% to £7.31 billion.
The loss before exceptional items and tax was £78 million, down from a profit of £181 million in the previous year, which was “principally due to [the] economic backdrop and inflationary pressures”.
The loss before tax widened to £234 million, from a loss of just £27 million 12 months earlier, on the back of property write-downs. And the impact of inflation was felt across the business, adding £179 million to its costs.
There were some positives as well, with customer numbers up 4% to 20.3 million, although the biggest jump was at Waitrose (+7% to 13.7 million), while John Lewis customer numbers rose only 0.5% to 11.7 million.
The company said John Lewis attracted more shoppers as it brought “stronger styling and design” to its own brand Fashion and Home offer.
It added that the chain maintained market share with volumes up 1%, supported by a strong performance from its branches, which were up 20% as footfall rose 34%, reaching 100 million for the first time since before Covid.
But John Lewis trading operating profit fell by £82 million to £676 million, “due to trading dynamics and inflation, partially offset by cost savings”.
ONLINE AND STORES
Online, John Lewis continued to see strong growth in its app, with traffic there up 13%. Over a quarter of online sales are now through the app. And while overall online traffic was down 5%, the number of its omnichannel customers was up 4% and is now 21% of its customer base.
The channel mix is now back to a pre-Covid 60:40 online/shops from the 70:30 pandemic mix. Its split of sales across categories was close to the last full year pre-pandemic with Fashion and Technology its largest sales (by value) categories at 37% and 36% of the sales mix.
The John Lewis business grew its market share in fashion, both through its signature own labels and new brand launches. And it said that of its 2.7 million budget Anyday customers, over 70% also bought from its mid-tier John Lewis & Partners range and more than 75% bought items from its branded ranges during the year.
It added that the strength of its offer and expertise is also evident in the record number of personal styling appointments, with over 60,000 in the year.
The company will pay no bonus again this time as it continues on its cost-savings drive. It has delivered over £300 million of cost savings in the last two years and it has a new target as it steps up its transformation focus to save roughly another £600 million by January 2026.
That's an ambitious goal, although it's clearly also a necessary one given the ongoing losses. The new CEO, with his background in businesses that have ruthlessly cut costs, will be crucial here.
Not that the firm is currently in any danger. It has a strong balance sheet with £1 billion of cash and total liquidity of £1.5 billion.
And while the business has “been working hard to drive out costs. Negotiating better deals with suppliers and simplifying ranges in both brands,” it has also been investing.
During the year it “invested significantly to improve digital capabilities to inspire customers and be more convenient: including in stores, online, through our app and our contact centres”.
Its future-focused store in Horsham has just undergone a multimillion pound revamp and is testing new concepts that will be rolled out to other stores.
Enhancing the wider in-store experience, it invested £5.4 million in 27 shops overall with store designs “using fresh new colours, as well as making it easier for customers to shop and find seasonal newness in-store”.
But there’s no disguising the challenges the firm faces as that new cost savings target and the sale of valuable assets like its golf courses (which “will give us more money to invest in our transformation”) highlight the urgency of its turnaround process.
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