John Lewis attracts a million fresh patrons as profitability rebounds

John Lewis

John Lewis claims it has made “significant progress” towards its strategic goals amid a swing back to profitability.

The department store chain John Lewis saw a significant improvement in its financial performance, with pre-tax profit increasing to £56m in the year ending 27 January. This marked a positive turnaround from the previous year, when the company experienced a loss of £234m. The success was attributed to sales growth, improved gross margin, and increased productivity.

The business also managed to attract one million new customers, bringing the total customer base to 22.6 million. Partnership sales showed a modest increase of 1% to reach £12.4bn.

Despite making a profit, the retailer has decided not to bring back its Partnership Bonus this year. This marks only the third time since 1953 that the bonus has not been awarded. The company explains that it is currently focusing on investing in its retail operations and will instead allocate a "record" £116m towards employee pay this year.

The launch of the new pan-partnership loyalty program is still in progress. Expected to be introduced this year, the company brought in Emily Wells, former Tesco head of loyalty strategy, in April 2023 to lead the development as its first group head of loyalty.

During a call with journalists today (14 March), Waitrose executive director James Bailey informed Our Website that the loyalty plans are progressing smoothly.

"We anticipate some significant changes in the upcoming year, with improvements for our customers as we merge the two schemes and benefit from the collaboration between John Lewis and Waitrose," he stated.

Sales at John Lewis dropped by 4% to £4.8bn in the year ending on 27 January. Despite this decline, the company saw improvements in fashion and beauty sales, although home and technology sales were weaker. On a positive note, John Lewis managed to attract a record 13.4 million customers and achieved an operating profit of £689m, which was up by £13m compared to the previous year. There is no need to provide further details, but it can be mentioned that there are plans for significant improvements in the upcoming year and beyond.

We are excited about the positive changes that will benefit our customers when we combine the two loyalty schemes. By joining forces, John Lewis and Waitrose will work together to provide double the benefits.

James Bailey, Waitrose

Over 170 new brands were launched in the past year, and there are plans to introduce 80 more brands while also enhancing their own brand offerings. Digital shopping is gaining popularity, with 53% of John Lewis customers making purchases online. The goal is to improve the online shopping experience by making navigation simpler and offering personalized product suggestions.

Peter Ruis, the executive director of John Lewis who returned to the company in January after an 11-year absence, is determined to revive the retailer's energy and success.

The John Lewis department store chain is all about confidence, inspiration, and innovation. There are plenty of ways to achieve that. Retailers are always looking for ways to improve, and we are no exception. We are focused on growing sales and inspiring all our customers, as mentioned in a recent media interview.

This focus on growth will involve ongoing investment in our stores. For example, we plan to double the size of our beauty hall at our flagship Oxford Street location this autumn. We are also committed to providing value to our customers by offering great prices from the start.

"Anyday, our own brand offering, remains a crucial part of our business. We are committed to providing great value to our customers with competitive prices. We also ensure that our prices match those of our main competitors in the branded product categories. Our focus on value is at the core of our retail strategy."

'Unashamed' focus on retail

Sales at Waitrose increased by 5% to reach £7.7 billion, with profits also rising by £170 million to £1.06 billion. The company dedicated £100 million to lowering prices throughout the year, resulting in an 8.1% increase in customer numbers to a total of 15 million.

Although volume sales experienced a 1.5% decline compared to the previous year, the average price of items rose by 6.6% due to inflation. Despite this, Waitrose successfully engaged customers with its ‘New Lower Prices’ campaign, leading to an increase in volume sales during the last four months of the second half.

Bailey confirmed Waitrose's commitment to investing in price for the next four years. Despite this, as inflation decreases, customers are moving away from solely focusing on price. Instead, there is a growing demand for organic, higher welfare, and more expensive products.

"People are still cautious and looking for promotions," Bailey explained. "The My Waitrose voucher scheme and the £100m investment in price are attracting new customers. However, we are also noticing a shift towards more thoughtful purchases, such as higher quality items that align with Waitrose's values."

Bailey mentioned that the business is happy with the new creative agency Saatchi & Saatchi, which took over from Adam&EveDDB after 14 years last summer.

He expressed that the agency understands the brand well, especially the focus on 'Food to Feel Good About' at Waitrose. Bailey stated that they are looking forward to more executions related to this concept, and the initial results show that it has been successful and well-received by customers. Overall, things are going well so far.

The £100m we’ve invested in price is still driving lots of new customers, but we are starting to see the shift into those more considered purchases.

James Bailey, Waitrose

John Lewis recently confirmed that it will stay fully partner owned, despite previous rumors about selling a minority stake in the company. The organization aims to maintain its focus on retail, but also intends to keep investing in its rental home proposition and financial services business, which saw a 15% growth over the past year. However, John Lewis did not provide a specific timeline for when its first rental home will be available for market.

“We view our company as a family of businesses, with our main focus currently on maximizing the potential of our established brands - Waitrose and John Lewis. In the future, we recognize the advantages of Buy to Rent (BTR) and Financial Services (FS), but they are part of our long-term strategy,” stated Nish Kankiwala, CEO of John Lewis Partnership.

“In the long term, we can utilize BTR to strengthen our financial position, while Financial Services play a crucial role in supporting our retail operations today.”

In the future, the business is planning to invest £542m, which is 70% more than last year. The investment will be focused on modernising technology, refreshing its shops, and simplifying its operations. Outgoing chairman Sharon White has emphasized the importance of modernizing the John Lewis brand as a significant step forward.

Editor's P/S:

John Lewis and Waitrose, the iconic British retailers, have reported encouraging financial results. John Lewis saw a significant swing back to profitability, with pre-tax profits reaching £56m. This turnaround was driven by sales growth, improved gross margin, and increased productivity. Despite the profit, the Partnership Bonus will not be reinstated this year, with the focus on investing in retail operations and allocating a record £116m towards employee pay.

Waitrose also performed well, with sales increasing by 5% and profits rising by £170 million. The company's £100 million investment in lowering prices resulted in an 8.1% increase in customer numbers. Both John Lewis and Waitrose are prioritizing investments in their businesses, with plans for modernizing technology, refreshing shops, and simplifying operations. They are also focused on enhancing their customer experiences, including launching a new pan-partnership loyalty program and improving the online shopping experience. These moves demonstrate the retailers' commitment to adapting to changing consumer behaviors and remaining competitive in the evolving retail landscape.