25 June 2024, 16:03
By Furniture News Jun 27, 2018

John Lewis sets out future of differentiation and investment

The John Lewis Partnership has outlined the next phase of its development strategy, with measures including a focus on competing through differentiation and innovation rather than scale, maintaining a higher level of investment in product and service, and enhancing the role staff play in the business.

Chairman Sir Charlie Mayfield says: "The John Lewis Partnership is a unique business with different ownership, a different purpose and a different outlook to any of our competitors. As retail changes we need to tread a path that enables us to thrive as a business while building on the qualities that make us different."

At John Lewis, the focus on differentiation will be in three key areas, says the retailer - unique products, personal service and expanding into new services. At the heart of the strategy is developing an assortment which is increasingly unique to John Lewis. Currently 30% of John Lewis’ sales are from own-brand and exclusive products, and the ambition is to increase this proportion to 50%. John Lewis' expansion into new services was signalled by the acquisition of home improvements business Opun earlier this month.

Sustained investment is essential to these plans, says the partnership, which has already taken steps to strengthen its balance sheet by £750m over the last three years, and is committed to maintaining a debt ratio position of around three times within some five years.

As such, the partnership’s HY profits before exceptional items are expected to be close to £0 this year, and it assumes that FY profits before exceptional items will be substantially lower than last year. The partnership expects to see a decline in John Lewis' business, and significant extra costs incurred by greater IT investment.

However, it has announced that it will take steps to strengthen its balance sheet by a further £500m over three years to invest in product and service innovation, which will be achieved by rebuilding profitability at Waitrose, creating more value from the property estate, and conducting a review of its pension scheme.

As a result, the partnership expects its cash position for this year to be in line or ahead of last year's, and its liquidity position to be the best it has been for 10 years, which will allow it to maintain investment at a rate of £400m-£500m a year, and a level of capital investment as a percentage of sales more than +10% ahead of typical competitors.

John Lewis currently operates through an estate of 50 stores – which may see adjustments, including exits or closures, but at a rate in line with what the company has seen over the last few years, says the retailer.

Finally, there will be a greater focus on staff. The partnership plans to continue to invest in pay, and aims to make the the business one of the healthiest places to work by 2025. As a sign of its intent, from September 2018 the two brands that make up the business will be known as Waitrose & Partners and John Lewis & Partners.

"For us, the relentless pursuit of greater scale is not the right course," continues Charlie. "Our plans put differentiation, innovation and partner-led service at the heart of our offer. The measures that we have outlined today are an important next step in our strategy that will ensure we emerge stronger from this period of profound change."

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