John Lewis Partnership has published its unaudited results for H1 (ended 31st July 2021), stating that it had been forced to take "difficult but necessary decisions to reduce costs and improve competitiveness" at the start of its five-year plan to return the business to a sustainable profit of £400m a year.
During the period, eight John Lewis stores were closed, and the consultation on the closure of an associated delivery hub is ongoing.
The number of head office roles were reduced, and there are plans to have fewer managers in John Lewis, says partner and chairman, Sharon White: "This has been painful for the partnership. 80% of affected partners have found new roles in the partnership in the half, while retraining support has been available to partners to secure work outside. We are also creating new jobs – a total of 500 next year to operate our new warehouse at Fenny Lock."
H1 profit before exceptional items was £69m – up £124m on 2020/21, when the partnership made a loss of £55m. Compared to the first half of 2019/20 when the business made a loss of £52m, profit is up £121m.
The business made savings of £66m in H1, and received business rates relief of £58m.
The partnership had exceptional costs of £98m in the half, due to property costs totaling £24m – principally to settle lease obligations arising from John Lewis shop closures – and redundancy costs of £54m. Including these exceptional items, the partnership made a loss before tax of £29m – a significant improvement on last year’s loss before tax of £635m, which was dominated by a write down in the value of John Lewis stores, states the retailer.
Underpinning the growth in profit was a +6% increase in sales across the partnership.
John Lewis saw strong sales growth in the first half, up +12% on last year (up +13% LFL). Almost 75% of sales were made online in H1, broadly the same as last year.
Growth was strong in Home (up +23%), yet margins remained subdued as sales in lower-margin categories remained higher than before the pandemic, and inflationary pressures in global freight pushed up costs.
John Lewis launched ANYDAY, a new own-brand which offers "style and value for money", and has been the retailer's most successful own-brand launch ever for a spring season, delivering £56m of sales in the half.
"Customers are returning to stores typically for larger, more considered purchases such as furniture and beds, and ‘take with you’ items like stationery and gifts, but so far not in the same numbers as before the pandemic," says Sharon. "For the period that our shops were open this year, LFL sales compared to two years ago were around -20% lower. City centres have been harder hit than retail parks and standalone stores."
Sharon says that the retailer's focus for the second half will be execution of the partnership plan, including expanding areas dedicated to John Lewis within Waitrose to approximately 40 shops by early 2022.
"We have begun the financial year with profits recovering, ahead of both last year and expectations set at our year-end results," she says. "Traditionally, our profits are skewed to the second half of the year because of the importance of Christmas, especially in John Lewis. As we look ahead, there is significant uncertainty. Like the whole of retail, we are managing global supply chain challenges and labour shortages. We are seeing inflationary pressures, which we expect to persist.
"We are taking a raft of measures to mitigate these risks and deliver Christmas for our customers. These include a successful campaign to recruit drivers, offering competitive salaries and benefits, recruiting 7000 temporary seasonal roles and booking additional freight to make sure John Lewis Christmas products arrive on time."