John Lewis and Waitrose maintain focus on customer experience, despite falling profits
The John Lewis Partnership , owner of department store John Lewis and supermarket Waitrose, this week said its competitive position would be strengthened in 2018 thanks to innovations and investments in customer experience made in previous years – and despite a fall in profits.
The company reported sales of £11.6bn in the year to January 27, 2% up on the previous year. Waitrose gross sales of £6.75bn were 1.8% ahead of last time, or 0.9% on a like-for-like basis, while John Lewis gross sales of £4.84bn were 2.2% up on last year, or 0.4% LFL. Pre-tax profits of £103.9m were 77% down on last time.
Sir Charlie Mayfield, chairman of John Lewis Partnership, said: "As we anticipated, 2017 was a challenging year. Consumer demand was subdued and we made significant changes to operations across the partnership which affected many partners. However, their hard work throughout the year was key to delivering gross sales of £11.6bn, up 2.0%, with like-for-like increases in both Waitrose and John Lewis. However, profit before partnership bonus, tax and exceptional items was down 21.9% mainly as a result of intensifying margin pressure in Waitrose.
"We said in January 2017 that we were preparing for tougher trading conditions with weakness in sterling feeding through into cost prices, putting pressure on margin, and much higher exceptional costs as a result of an acceleration of planned changes. This was why we chose to reduce the proportion of profits paid as Partnership Bonus last year so as to absorb these impacts while continuing to invest in the future and in strengthening our balance sheet. We did both and I am pleased to say that despite lower profits, strong cash flow has enabled us to reduce our total net debts."
Here are the points that struck us about John Lewis' multichannel strategy.
John Lewis , a Leading retailer in IRUK Top500 research
, said customer numbers had risen by 2.5% to 12.6m while its Net Promoter Score also increased. Work to improve the customer experience included the introduction of two hour delivery slots, online order tracking and the ability to see more detailed product information and branch stock availability online. It also launched 'experience desks' in four stores, providing concierge style services.
In the year ahead it plans several "test and learn" innovations bringing together customer service and technology. It will also complete its move to a single online platform that it says will provide "customers with a more seamless shopping journey optimised for whichever device they use." It said store openings in White City and Cheltenham would take forward its vision of the reinvented department store.
Strong sales growth came in own brand womenswear (+14.9%), part of an overall 3.2% rise in fashion sales. Electricals and technology sales lifted by 2.6%, with connected home and wearable technology sales particularly buoyant. But home sales fell by 0.8%, with lower demand for upholstery and fitted flooring and furniture.
The supermarket, a Top50 retailer in IRUK Top500 research, said lower margins in food, as it decided not to pass all cost increases to its shoppers, and investments in customer experience had hit profits over the year. As a result, operating profit of £172m was 32.1% down on last time.
It set out how it invested in its stores and online, taking more sushi counters into stores, and investing in its website. Online grocery sales grew by 10.9% with, said Waitrose , a "marked acceleration in the second half".
Over Christmas it had more in-branch tastings, and also launched self service check-in iPads for John Lewis Click & Collect orders in 140 branches ahead of Black Friday. It is also now rolling out multifunctional devices in its stores to enable partners to give customers up-to-date information.