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John Lewis profits soar as staff get 17% bonus


Department store group John Lewis Partnership saw gross sales rise 9.3 per cent to £9.54 billion in its full year, according to results published today as it announced a 17 per cent bonus for Partners, the equivalent of nine weeks’ pay.

Pre-tax profit at the group soared 15.8 per cent to £409.6 million in the year to January 26th 2013 as revenue reached £8.47 billion, up 9.1 per cent on the same period last year.

‘This has been a good year for the Partnership with growth in sales and profit above our expectations,” said Charlie Mayfield, Chairman of John Lewis Partnership.

“Both Waitrose and John Lewis gained market share for what is now the fourth consecutive year.

“As a result I am delighted that 84,700 Partners will receive a bonus of 17 per cent, equivalent to nearly 9 weeks’ pay.”

John Lewis department stores reported a 13.5 per cent rise in gross sales to £3.78 billion over the period as like-for-like (LFL) sales climbed 10.5 per cent, buoyed by effective marketing campaigns and the retailer’s high-profile sponsorship of the London Olympic Games.

Operating profit grew to £216.7 million, a rise of 37.2 per cent on last year and the retailer achieved a growth in market share across all three main categories.

Electricals and Home Technology sales rocketed 28.9 per cent over the year, helping John Lewis reach its highest ever market share in computers including tablets, TV’s, cameras and small and large electrical goods.

Fashion sales increased by 9.1 per cent thanks to new brand acquisitions and designer collaborations such as Alice Temperley’s Somerset range, launched last year to considerable fanfare.

Home also reported strong growth with sales rising 6.2 per cent and the retailer now has the second largest home market share in the country, driven by the expansion of its ‘At Home’ offering, which opened three new stores over the period.

A total of four new shops were opened over the period, including one new format store though John Lewis’ online offering proved particularly popular as online sales surged 41 per cent to £959 million, now accounting for more than 25 per cent of total trade.

Strengthening its IT and supply chain infrastructure is a key strategy in the year ahead and John Lewis successfully relaunched its online platform last month after a £40 million investment, with plans to launch French and German sites later this year.

Click & collect orders almost doubled year-on-year as the retailer introduced the service across all John Lewis stores and 193 Waitrose stores and 43 per cent of purchases via the channel are now collected from Waitrose branches.

Supermarket Waitrose saw gross sales perform strongly over the year, up 6.7 per cent to £5.66 million in a tough market while market share grew 0.2 per cent to 4.9 per cent.

LFL sales jumped 3.4 per cent, driven by a particularly positive second half as investment in lower prices proved fruitful thanks to the grocer’s commitment to changing customer’s views on its price position.

Neil Saunders, Managing Director of analyst firm Conlumino, applauded such strong results given the “intense competition in the sector”, though he warned: “On the value front, Waitrose will never achieve parity with some of the mainstream multiples in terms of price perception.

“However, as it has proved throughout the downturn, this isn’t necessary in order to drive market share.

“Arguably what Waitrose shoppers want is reassurance that across key staples their grocery shopping is no more expensive than it is elsewhere.

“Through its brand matching policy and its long established essential range, which continues to expand, Waitrose has succeeded in providing this and, in so doing, has reduced the number of customers trading down to rivals do to their basic shop.

“Outside of everyday staples, where Waitrose does provide more premium options, it justifies its price points through superior quality that ultimately gives the customer a sense of value for money as well as sating their appetite for indulgences.

“Waitrose’s ability to straddle the price-quality equation is impressive and has helped it not only weather, but beat the downturn.” recorded a similarly successful year as sales soared 49 per cent, compared with 19 per cent growth for the online grocery market as a whole, according to data from Kantar Worldpanel.

Bricks & mortar expansion remains a primary concern for the retailer, which opened eight Little Waitrose convenience stores during the year and 11 new core shops, bringing the total number of stores to 290 after one closure.

Eight core branches are set to open over the coming year as well as up to 10 Little Waitrose branches, with the first opening in Vauxhall, London in April, while refurbishments to existing stores are also in the pipeline.

Investing in customer service is also part of Waitrose’s forward-looking plan, with roles for 200 fresh produce and horticulture specialists as an additional 2,000 Partners will become branch product advisors in the year ahead.

Commenting on the stellar performance, Saunders concluded: “Both arms of the Partnership turned in a stellar performance last year, and with growth far in excess of the overall market both have successfully gained share across their respective sectors.

“Common across both businesses is the appetite for innovation, the willingness to invest and the relentless focus on understanding, and delivering for, the customer.

“The role the Partnership structure plays in fashioning these traits is vital: it acts as a both a motivator for staff and as a facilitator for long range decision making.

“In these days of bean-counting and financial shenanigans too many retailers are seen, first and foremost, as cash machines whose primary purpose is simply to make as much money as possible in as short a time frame as possible regardless of longer term consequences. Partnership is a defence against such trends.

“That’s not to say that the Partnership is uncommercial; it isn’t. But it does mean that the businesses it owns are, first and foremost, retailers.

“They put the customer, market and competitive understanding at the heart of what they do, set the strategy accordingly and then deliver sustainable value over the longer term. That, in our view, is exactly as it should be.”

Published on Thursday 07 March by Editorial Assistant

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