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January 10, 2019

Modest Christmas for John Lewis as warns on FY profit

By Beth Wright

The John Lewis Partnership has reported a rise in both revenue and like-for-like sales over the Christmas trading period, but not enough to offset a warning from chairman Sir Charlie Mayfield that annual profits are set to be “substantially” lower this year.

The group said in a trading statement today (10 January) that gross sales at its John Lewis & Partners department stores were GBP1.16bn (US$bn) in the seven weeks to 5 January, up 2.5% versus last year and up 1% on a like-for-like basis – outperforming the market by 2%.

Gross sales at the John Lewis Partnership, meanwhile – which includes the Waitrose supermarkets – were up 1.4% versus last year to GBP2.21bn.

The company said the trading period was defined by a longer Black Friday promotion – which contributed to the biggest sales week in John Lewis & Partners’ history – a very strong week running into Christmas including a record Christmas Eve in shops, as customers took advantage of the full shopping weekend, and an encouraging first week of clearance.

Like-for-like sales grew by 1% in the period overall, with particularly positive performances in fashion up 6.8%, with stand-outs in beauty up 11.2% and own-brand womenswear up 14.7%.

However, Mayfield said gross margins remained under pressure in what was an intensely competitive pricing environment, leading to a warning on full-year profits.

“We continue to expect full year total Partnership profits to be substantially lower this year, driven by slower sales growth over the year and margin pressure in John Lewis & Partners along with higher costs, mainly as a result of our continued investment in our IT capability,” he said.

Hannah Thomson, senior retail analyst at GlobalData, notes the modest sales growth John Lewis & Partners is encouraging, given the troubled state of its department store rivals.

“John Lewis should be recognised for successfully implementing its ‘differentiation and not scale’ strategy. With a network of 51 shops, it is not laden with underperforming stores, and it has been wise to facilitate growth of online by extending cut-off periods for click & collect orders, as well as making this service available in more Waitrose stores,” Thomson says. “This allowed John Lewis to fulfil 52% more click & collect orders on Christmas Eve, which is especially important for satisfying last-minute Christmas shoppers.”

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