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John Lewis and Waitrose see shoppers change the way they buy against backdrop of post-pandemic inflation

A John Lewis partner prepares for Christmas. Image courtesy of John Lewis Partnership

John Lewis and Waitrose have seen the balance between online and in-store rebalance as its customers’ shopping habits change in the wake of the Covid-19 pandemic. Shoppers have particularly returned to John Lewis’ city centre stores and are making fewer of their sales online compared to last year – although the proportion of ecommerce sales is still well ahead of pre-pandemic levels. The retailer says it has won more shoppers but they are spending less in the cost of living crisis, resulting in a bottom line £99m first-half pre-tax loss. 

The update comes as the John Lewis Partnership today reports revenues of £4.95bn across its John Lewis and Waitrose brands in the 26 weeks to July 30 2022. That’s down 3.8% from £5.15bn a year earlier. It also reports a first-half top line loss of £92m – down from a profit of £69m at the same time last year – and, after one-off costs, a bottom line pre-tax loss of £99m – as last year’s £29m loss widened. The group has £1.5bn available, with £1.1bn in cash and £0.4bn in lending facilities.

“I said at our end of year results in March that the outlook for this year was uncertain: war had just broken out in Ukraine and inflation was elevated and looked to be persistent,” says Sharon White, chairman of the John Lewis Partnership. “No one could have predicted the scale of the cost of living crisis that has materialised, with energy prices and inflation rising ahead of anyone’s expectations. As a business, we have faced unprecedented cost inflation across grocery and general merchandise.”

She adds: “We are responding to the cost of living crisis by supporting those who need it and by stepping up our efficiency programme. We are forgoing profit by making choices based on the sort of business we are, led by our purpose – ‘working in partnership for a happier world’ – by helping our partners, customers, communities and suppliers.”

Looking ahead, she says the partnership is well-placed for a “uniquely uncertain” outlook because of the strength of its balance sheet, the loyalty of its customers and the dedication of its staff. “A successful Christmas is key for the business given the first half,” says White. “We will need a substantial strengthening of performance, beyond what we usually achieve in the second half, to generate sufficient profit to share a Partnership Bonus with Partners. Much will depend on the wider economic outlook and consumer sentiment.”

John Lewis: permanent online shift 

John Lewis sales grew by 3% to £2.1bn in the first half of the year, while operating profits stood still at £295m as shoppers returned in-store and as the direct costs of Covid-19 reduced – with cost savings of about £22m achieved. However, inflation affected pay, the cost of products and of freight. Not all cost increases were passed on to customers – who grew in number by 4% – and the retailer invested £500m to keep prices low while maintaining quality as it retired its Never Knowingly Undersold promise. 

Some 59% of sales took place online, and 41% in shops. At the same time last year, 74% of sales were online and 26% in-store. Since then John Lewis has seen the balance stabilise at about 60/40 online/in-store. That represents a reversal of the pre-pandemic 40/60 online/in-store ratio and reflects, says the retailer, “the longer term effects of the pandemic on customer behaviour and closure of 16 stores in the last two years.” It adds: “We expect this shape of trade to continue, with our shops playing a critical role in driving both customer experience and excitement and supporting our online business, through giving our customers convenient Click & Collect, browsing and returns options.”

More than 26% of John Lewis first-half online sales took place in its mobile app – up from 22% last year. Visits to the app are also up 4% year-on-year. “Adopters are more loyal to the brand, typically spending an additional 15% in their first year.”

The department store retailer, ranked Top50 in RXUK Top500 research, plans to test a new John Lewis store format in 2023.

Waitrose: post-pandemic shopping habits

Waitrose first-half sales fell by 5% to £3.6bn as more shoppers (+6%) bought but opted for more budget options and smaller baskets. Operating profits fell to £432m from £525m last time. Some 15% of sales were online in the first half – 14% via its own website and 1% via Deliveroo – with the remaining 85% of sales taking place in-store. The share of online sales is down from 18% in the same period last year (1% on Deliveroo) but up compared to both its 2020/21 financial year (11% online, 89% in-store) and its 2019/20 (5% online/95% in-store). 

“The cost of living crisis together with the aftermath of lockdown restrictions is changing shopping habits,” says John Lewis Partnership in today’s half-year report. “Customers continue to choose Waitrose for quality, value, ethics and service, but more frequently they are shopping between our value, mid-tier and premium ranges to manage tighter budgets. In addition, despite total transactions (in-store and online) increasing by 14% year-on-year, we saw a step down in basket sizes with an 18% reduction in the average basket value.”

The supermarket, which says it has seen growth in top-up shopping both online and in-store, now has 57 convenience stores and is delivering via Deliveroo from 220 stores. It has opened two food halls in branches of Dobbies garden centres, with another 48 planned in the next 18 months. “Our extension into more convenient market segments, together with supplier partnerships, will help us reach new customers,” says today’s report. At the same time, it is also rolling out branches of John Lewis shop-in-shops in branches of Waitrose, set to expand to 88 by the end of the year, from 49 currently. Waitrose is also ranked Top50 in RXUK Top500 research.

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