John Lewis swings to loss but says fashion is star category
John Lewis’s half-year results for the period to the end of July saw the John Lewis and Waitrose owner making a loss before tax and exceptional items of £92 million, compared to a profit of £69 million a year ago.
But it said it’s “not unusual for us to make a loss in the first half of the year — we have done so in three of the last four half years”. Its trading is “heavily skewed to Christmas with most of our profits coming in the last quarter of the year”.
The loss figure was before exceptional items, principally reducing the size of its London office space. Including exceptionals, it made a pre-tax loss of £99 million.
The employee-owned company blamed inflation affecting consumer spending and evolving customer trends post-pandemic but it said that fashion has been its top-performing category in its department stores.
The company also said it now has more customers year on year in both brands (up 6% in Waitrose and 4% in John Lewis) “but they are spending less. Inflation has increased our costs, which means we have to do more to meet our original efficiency targets because we have not passed on all of the increased costs to our customers”.
And as for those trends, while it has seen in-store spending rebounding and online remains elevated compared to pre-pandemic (a shift it thinks is permanent), it has also seen customers “move their discretionary spending from high-margin, big-ticket household items to restaurants and holidays”.
Its Waitrose supermarkets sales were down 5% (total and like-for-like) year on year at £3.6 billion.
But the John Lewis department stores operation saw sales up 3% at £2.1 billion. And against three years ago, they rose 13% like-for-like (or 4% in total).
John Lewis Trading operating profit was “maintained at £295 million”.
The sales rise “has been driven by a return to shops,” it said. “The share of sales in shops has averaged 41% for the half year, compared to 26% last half year, during the pandemic, and 60% before Covid. City Centre stores have come back most strongly with the return to more office working”.
Fashion has been the best-performing category, growing 25% on the year with a strong performance in holiday wear, as people returned to travel and summer breaks. But the home and technology categories declined.
The company added that the impact of the rising cost of living is evident in patterns of spending. It value value own-brand Anyday saw sales rise 28% on the year.
H1 customer numbers were strong, with half a million more people shopping with John Lewis than a year ago. Total customer numbers are 12.2 million, up 4%.
The company also announced a one-off cost of living support payment of £500 for full-time staff and it’s increasing the lowest rates of pay.
It added that the outlook “is uniquely uncertain [but] we believe we are well placed to navigate the current inflationary headwinds”. It has a strong balance sheet, loyal customers “and a deep understanding of their changing habits and needs”.
A successful Christmas “is key for the business given the first half. 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”.
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