Subdued consumer confidence and depressed demand for big-ticket and bespoke items contributed to substantially lower profits for the John Lewis Partnership in the year to 26th January 2019.
Operating profit at John Lewis & Partners was down sharply, by -56% (to £114.7m) – principally due to weaker Home sales, gross margin pressure, higher IT costs, the property impact of new shops and lower profits on asset sales.
Despite this, total net debts were reduced by £401.3m, in line with the retailer’s strategy to build cash reserves and maintain annual investment levels of £400m-£500m each year.
The retailer made significant investment in staff during the year – particularly in leadership development, apprenticeships and pay – and the board awarded a 3% bonus, despite indicating previously that it might not do so this year.
"The market context continues to be challenging,” says John Lewis Partnership chairman, Sir Charlie Mayfield.“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.
“As a result, sales in John Lewis & Partners were up +0.7% (down -1.4% LFL).
“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 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.
“The answer for the partnership is clear and, despite tough conditions and lower profits, this has been a year when we have developed our brands and invested in partners. Our difference comes from our people, and the energy, commitment and personality they bring to delivering excellent customer service and high-quality products to our customers.”
According to Charlie, the strongest sales growth came from areas in which the retailer has made the greatest investments in new product and services. The year saw John Lewis & Partners introduce shorter delivery windows and live order tracking, plus trials of in-home services.
The business has now built up a strong liquidity position, at nearly £1.5b – almost double that of five years ago.
“Given the current level of uncertainty, we expect 2019 trading conditions to remain challenging," concludes Charlie.