John Lewis Partnership’s (JLP) results for the year to the end of January showed the retailer in recovery mode. Although it’s not yet at peak performance, it’s clearly on the way back.
With its unaudited results on Thursday, it talked of “transformation delivering solid progress” as profit before tax and exceptional items tripled from £42 million to £126 million. Profit before tax grew from £56 million to £97 million, up 73%.
Sales were up 3% year-on-year at the group that owns John Lewis department stores and Waitrose supermarkets, hitting £12.8 billion.
The operating profit margin improved to 2%, up 0.9 percentage points, and customer numbers grew by 2% over the year. Cash generated from operations increased 23% to £532 million and it repaid a £300 million bond from cash reserves resulting in its lowest borrowings since 2002.
There was still no return of the coveted bonus for staff (or Partners as they’re known at the employee-owned business), but it has invested a further £114 million in Partners’ pay and up to £600 million in business transformation, which has taken priority over a bonus this year.
Waitrose supermarket sales grew 4.4% but at the John Lewis department store/webstore operation, sales of £4.8 billion were only “in line with last year” — that is, they were flat. And the identical £4.8 billion figure it had achieved in the prior year had actually been a 4% fall, so the latest period’s figures still didn’t get John Lewis back to where it had been a few years ago.
Beating the market
However, the John Lewis unit did perform “ahead of the market” sales-wise, “with momentum building across the year”. Its adjusted operating profit was £45 million.
JLP said the year was pivotal for the department stores business “in what remains a challenging environment for the sector. We have taken steps to invest in the performance of John Lewis. Our focus has been on providing even better value through the return of the ‘Never Knowingly Undersold’ promise, improved customer service and better product ranges”.
That strategy showed early success, with the business experiencing contrasting halves within the year. H1 saw a 3% fall in sales and a £24 million drop in adjusted operating profit due to investments in growth. Marked improvement in H2 led to a 3% increase in sales and £8 million growth in adjusted operating profit, “creating momentum for the future”.
The John Lewis chain and webstore also turned in a good Christmas performance with 4.1% year-on-year sales growth over the eight weeks of peak, “and ‘Brand Buzz’, as measured by YouGov, at its highest for four years”.
JLP has invested heavily in its stores including brand new Beauty Halls in Oxford Street, High Wycombe and Cheadle, “and exciting branded shop fits across Home and Fashion”.
And it has been introducing “new and in-demand brands, with more than 200 launches from the likes of Marc Jacobs and Sign of the Times in Fashion, and Trinny London in Beauty”.
JLP chairman Jason Tarry said of all this: “These are solid results, which show that our customers are responding well to our investments in quality products, value and service. We have made good progress with much more still to do.
“Looking forward, I see significant opportunity for growth from both our brands. Our focus will be on enhancing what makes these brands truly special for our customers. This will involve considerable catch-up investment in our stores and supply chain, underpinned by a strong focus on the core elements of great retail.”
And outgoing CEO Nish Kankiwala added: “Tripling our profit is a significant testament to the progress of our transformation. Both brands are showing good momentum. Our strategic investments in product innovation, quality, service and value have yielded significant improvements in customer satisfaction, attracting more customers to shop with us.”
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