Fashion rides to John Lewis's rescue in tough year
It was tough in 2017. Who says so? One of Britain’s most successful retailers, that’s who. John Lewis Partnership saw its profits falling over 20% in the face of a competitive environment in which consumers really had to be convinced to part with their cash.
And it expects more of the same in the current financial year, saying Thursday that “we expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity. We therefore anticipate further pressure on profits.”
But fashion was a bright spot and the company’s own labels really stood out. With an ambition of making in-house labels an even bigger part of its business, this suggests there is still plenty of growth potential.
So what actually happened last year? Well, profit before partnership bonus, tax and exceptional items plummeted by 21.9% to £289.2 million, even though gross sales were up 2% at £11.6 billion in the period to January 27.
Those weak figures also meant that the people who work there - the ‘partners’ who own the firm - will only get a bonus adding up to 5% of their salaries, down from 6% a year ago.
But the John Lewis department store chain itself didn’t do too badly last year with the Waitrose supermarket having been responsible for dragging the results down. And fashion, as mentioned, was a big success story for the chain.
Operating profit at the John Lewis stores and webstore rose 4.5% to £252.4 million as electricals also boosted sales. However, so far this year, the stores have under-performed with the first few weeks of the new year seeing John Lewis gross sales down 2.8% in total and 3.4% on a comparable basis, while Waitrose sales have risen.
Back with last year, the company said that John Lewis’s comp sales were only up 0.4% but that’s not a bad result given that the backdrop was tough and the interiors category was weak.
“We continued to improve productivity across the business and leveraged investments made in recent years in our distribution network,” the company said.
It added that customer numbers increased by 2.5% to 12.6 million and its Net Promoter Score – which indicates customers’ willingness to recommend it to others – increased.
As part of its drive to improve customer experience it introduced a number of initiatives including two-hour delivery slots, online order tracking and the ability to see more detailed product information and branch stock availability online. And it launched Experience Desks in four shops providing customers with 'concierge style' services to help them make the most of what is available in-store.
This all helped fashion sales rise 3.2% in the year, boosted by a particularly strong performance in womenswear, up 5%, with own brand womenswear up 14.9%.
Having launched its first in-house denim lifestyle brand for women – And/Or in March – it built on the success of its luxury own label Modern Rarity, and extended this further via a collaboration with Eudon Choi.
And its additional investment to extend its premium brand offer in beauty contributed to beauty sales increasing 8.8%.
It’s all good news for the firm and in the tough retail market at present, good news is always welcome as it’s thin on the ground.
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