Recent investments in womenswear have seen the category’s sales jump at John Lewis & Partners, but not enough to offset a fall in group profits for the year which sank by more than 45% to GBP160m (US$210m), as a result of a “challenging” retail backdrop.
The Partnership’s profits for the year ending 26 January — which includes the results of both John Lewis & Partners and Waitrose & Partners units — were hit by a continued “challenging” retail market overall; something felt by rival Debenhams which slashed its full-year profit outlook yesterday on poor sales performance.
“That’s evident in our results, especially in John Lewis & Partners, where we saw near constant discounting across many categories from October onwards in response to the combination of subdued demand, excess retail space and some other retailers’ distress,” the retailer said.
Profit before tax at the group plunged 45.4% to GBP160m from GBP292.8m a year earlier, while group revenue edged up 1% to GBP10.3bn.
The Partnership said weaker Home sales and gross margin pressures “drove around half of the reduction in profits”, with the remainder largely due to additional IT costs and property-related items.
Sir Charlie Mayfield, chairman at the John Lewis Partnership, said: “In line with expectations set out in June, our Partnership profits before exceptionals have finished substantially lower in what has been a challenging year, particularly in non-food.”
However, he added there were several areas where the business performance moved forward, particularly in areas where it had invested.
Its full range relaunch of own-brand womenswear, including new product, in-store concept and enhanced Partner training, delivered sales growth of 12.9%. Over the next year, John Lewis & Partners will be completely relaunching its menswear division.
Gross sales for John Lewis & Partners rose 0.7% (down 1.4% on a like-for-like basis).
Revenues at the division were also up by 0.7% at GBP3.9bn, while operating profit before exceptional items in the John Lewis & Partners arm fell 55.5% to GBP114.7m
“Near-term uncertainty, politically and in the economy, is having a major impact on consumer confidence, but we do not believe the market conditions are cyclical,” the group added. “The disruption we have seen on the High Street, including business failures and renewed interest in mergers and acquisitions, are instead signs of an inevitable market adjustment which will require greater clarity on whether brands are competing on scale or difference.”
Zoe Mills, retail analyst at GlobalData comments: “Fashion achieved strong growth, boosted by the retailer’s expansion of own-brand collections including its John Lewis & Partners womenswear range as well as AND/OR and Modern Rarity, driving own-brand womenswear sales to increase 12.9%. These ranges will have gone some way to protect profit margins, while also highlighting that among department stores, investment in own-brand collections can be worthwhile when they resonate with core customers.”
However she says the Partnership price match promise “despite being commendable and a key point of differentiation, will continue to plague profits unless, as it has within clothing, it rapidly moves towards more brand exclusives and own-brand products, getting closer to its target of 50% of products.
“With House of Fraser and Debenhams both struggling and John Lewis reporting muted results, it is clear that the overall department store model needs to be revamped to ensure future longevity.”
