Leading retailer John Lewis and Partners has seen sales and profits tumble 2%, with an even larger 3% drop at Waitrose as the group surprised markets by posting a £78m loss for the year.
The company has blamed rising costs – which topped £180m in additional expenditure. When exceptional costs, such as a write down in the value of Waitrose stores, the loss3 climbs to £234m.
The company has blamed rising energy and other costs, along with product supply challenges and a major fire in its Brinklow warehouse for part of the huge deficit.
As a result ‘partners’ will not be getting a payment this year, although the company pledges to continue to help staff out in these straightened times, building on the £500 cost of living payments made last winter and the supply of free food.
The company is also pledging to double down on its Partnership Plan to reshape its business. Waitrose is expanding in the all important convenience market through tie-ups with Dobbies (garden centres) and Shell, and getting exclusive brands (Gail’s, Plants by Deliciously Ella). John Lewis has set out a clear pricing approach (good, better, best), brought stronger styling and design to own-brand Fashion and Home and introduced over 200 new brands.
A new £500m venture with abrdn secured investment in JLP’s ‘build to rent’ property business and financial services – a business the company has been in for nearly 20 years – is growing well, with popular products like its relaunched pet insurance. 600,000 customers joined JLP’s new Partnership (credit) Card. Not a smooth process for everyone, the company admits, but customers are, on average, now spending more than before.
“Faced with a more challenging environment, we have adapted the Partnership Plan to improve the profitability of the business, tripling our target for efficiency savings from £300m to ~£900m (by January 2026),” says Sharon White, partner and chairman. “The mantra for the year is cost out, margins up and customer focus.”
Josh Holmes, Senior Consultant at Retail Economics comments: “These results are worse than expected, with both Waitrose and John Lewis seeing profits retrench as inflation sends costs spiralling.
“John Lewis has been underperforming for some years now and regular shake-ups at management level have not helped. Bringing in a new CEO is the latest admission that the turnaround plan is not on track, with significantly more work needed to put the business back on top.”
The company has tripled its target for cost savings, but this raises genuine concerns over the impact on innovation and investment in its customer proposition.
Holmes adds: “Prioritising profitability and shoring up balance sheets is understandable in the current inflationary environment, but the retailer must ensure that it doesn’t lose sight of what made them great in the first place – quality, customer service, and an aspirational brand image.
“Putting cost-cutting at the forefront of the company agenda could undermine these values, and risks losing further ground to competitors that have been quicker to invest in their stores, partnerships, and omnichannel propositions.”