John Lewis Partnership’s Christmas sales growth fails to improve profit outlook

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John Lewis weekly
// Overall partnership sales up 1.4% Y-o-Y
// John Lewis like-for-likes up 1%, underpinned by record Black Friday sales week
// Waitrose like-for-likes up 0.3%, boosted by stellar online sales leading up to Christmas
// Chairman Sir Charlie Mayfield: full-year profits will still be “substantially” lower

John Lewis Partnership has revealed an uptick in like-for-like sales for its Christmas trading period, although it was not enough to improve its gloomy full-year profit forecast.

For the five-week period to January 5, the parent company of John Lewis and Waitrose recorded gross sales of £2.207 billion – a 1.4 per cent year-on-year increase.

John Lewis gross sales came in at £1.16 billion, up 2.5 per cent year-on-year and up one per cent on a like-for-like basis.

The partnership added that its department store fascia outperformed the market by two per cent.

Meanwhile, stablemate Waitrose recorded a 0.2 per cent year-on-year increase in gross sales (excluding fuel) to £1.047 billion, which equated to a 0.3 per cent increase on a like-for-like basis.

Black Friday contributed to the biggest sales week in the history of John Lewis, although John Lewis Partnership chairman Sir Charlie Mayfield warned that gross margins for the department store chain remained under pressure due to an “intensely competitive pricing environment”.

Mayfield also attributed Waitrose’s lacklustre like-for-likes to reduced promotional activity, but added that it achieved the best operational performance the partnership had seen “for some years” and therefore was on track to meet profit expectations for the full year.

For the partnership as a whole, Mayfield reiterated that total full-year profits is still expected to be “substantially” lower.

He said this was driven by slower sales growth over the year and margin pressure in John Lewis, along with higher costs relating to continued investment in the company’s IT capability.

“The actions taken in recent years to prepare for the current pressures in retail mean that the partnership has the financial strength and flexibility to pay a modest bonus this year, without impacting our ambitious investment programme,” Mayfield said.

“However, the board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time.”

John Lewis Partnership’s Christmas trading statement also included an update on its business strategy.

It said “good progress” was being made, and that it expected to deliver “significant positive free cash flow” this year.

The strategy includes Waitrose and John Lewis focusing on differentiation rather than scale, enhancing the role of employees in business growth, maintaining investment levels at £400 million to £500 million per year, reducing the debt ratio over the medium-to-long term, and strengthening the balance sheet by £500 million over three years.

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