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Retail Viewpoint – John Lewis

John Lewis cuts staff bonus again to 5%.

John Lewis Partnership has cut staff bonuses for the fifth year in a row after the Partnership reported a 21.9% fall in profit before tax and exceptionals. This dip in profits was largely due to lower gross margins at Waitrose from a weak exchange rate and competitive pricing. Yet John Lewis staff will also bear the brunt despite relatively robust operating profit growth of 4.5%. This is despite heavy discounting towards the end of the financial year, initiated by Black Friday, and a significant rise in ‘never knowingly undersold’ price matches at the end of the year.

Overall sales have been relatively subdued at John Lewis, because despite strong performances in clothing, particularly in womenswear, which was up 5.0%, and beauty, which rose 8.0%, home has been a real weak spot, falling 0.8%. This is, to an extent, expected as the home sector has suffered severely from weak demand in big-ticket spending; furniture retailers Multiyork and Feather & Black fell into administration in November 2017, along with Warren Evans in January 2018, and more will follow. Smart or connected home and wearable technology are key focus areas this year; as John Lewis takes the lead in this immature market, it will gain trust among consumers and ensure it is the partner of choice for premium brands.

Recent trading has unsurprisingly been significantly knocked by the recent snowfall – John Lewis reported that fashion sales were down 18.8% and home sales declined 17.2% year-on-year in the seven days to 3 March. For the first five weeks of the year, John Lewis like-for-like gross sales dropped 3.4%. And John Lewis may have been less impacted than some, particularly retailers in out-of-town retail parks and town centres where access is difficult for drivers.

Source: GlobalData 8 March 2018

March 2018

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