Jul 8, 2016
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John Lewis says post Brexit currency shift 'a big issue'

Jul 8, 2016

The depreciation of sterling versus the U.S. dollar in the wake of Britain's vote to leave the European Union could potentially become a major issue for John Lewis, the country's largest department store group said late on Thursday.

Britain's shock Brexit vote last month has stunned financial markets, with the pound bearing the brunt of the early violent reaction, tumbling to a 31-year low against the dollar.

John Lewis

"Genuinely it is a big issue for us to face into next year," John Lewis Managing Director Andy Street told reporters at a media dinner.

John Lewis imports about two-thirds of the goods it sells and one third is purchased in dollars.

Street said the firm is fully hedged for its 2016-17 financial year. It has "a good proportion" of hedging for the first half of its 2017-18 year and "a lot less" for the second half.

"It can never be quite that simple because you don't know where cost inflation comes through from other things that are imported, perhaps one stage away from direct importing," he noted.

With Britain now convulsed by its worst political crisis in modern times, investors are worried the economy could tip into recession, hammering consumer confidence and threatening corporate earnings.

"At the moment this is a political crisis, it's not an economic crisis. But one could turn into the other if not properly handled," said Street.

He said John Lewis had not changed any investment plans post the Brexit vote.

British consumer confidence fell at the fastest pace in 22 years after the June 23 referendum, according to a survey by market research company GfK.

John Lewis said on Tuesday its sales growth slowed in the week to July 2 - the week following Britain's vote to leave the EU. However, the data was impacted by an earlier start to its summer sale and year-on-year weather comparisons.

Street said John Lewis' worker co-ownership model, which has been lauded by Prime Minister David Cameron, would stand it in good stead if there is an economic downturn.

"If we are into tougher times, it's our model, our ability to do things that are counter cyclical and possibly even counter intuitive that will see us through," he said.

The Birmingham Mail newspaper reported on Thursday that Street is to apply to become the Conservative Party candidate to be the West Midlands' first-ever elected mayor.

Street, who has been John Lewis' managing director since 2007, described the report as "speculation" but did not deny it.


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