John Lewis turns rain into strong first-half results
John Lewis, the owner of 26 department stores and the Waitrose supermarket chain, has delivered a stellar half-year performance, bucking the overall trend on the high street, where retailers have been hit by the combination of dismal summer weather and fears of a consumer slowdown.
However, its chairman, Charlie Mayfield, added his voice yesterday to a growing chorus of retail chiefs who have expressed concerns about the outlook in the run-up to the all-important Christmas period.
" Retailers are genetically programmed to be nervous about Christmas," Mr Mayfield said. "We have to take twice as much money as we are taking at the moment. But I am very confident in the product offer, and in our quality of service."
He added that it was right to be cautious. " There is uncertainty due to interest rate rises and volatility in the credit, but I don't think we are heading for a high street slump," he said. "Underlying earnings are pretty strong and not showing signs of weakness, and trading is getting stronger. It will be a bit of a battle but our partners will fight for every pound."
Earlier this week, Next and JJB Sports also warned of a tougher retail climate ahead. Mr Mayfield said that John Lewis, which is owned by its staff – who are known as partners – had been working hard "to ensure it had the right products for its customers".
Yesterday, the partnership unveiled a 51 per cent jump in half-year profits to £146m, which it said was driven by improved gross margin, efficiency and tight cost control.
Like-for-like food sales at Waitrose were up 3.2 per cent over the six months to 28 July. Sales growth slowed in the second quarter to 2 per cent, down from 4.5 per cent in the first quarter. This was in line with the market, as consumers stopped spending on barbecue and party foods during the days of endless rain. But the poor summer benefited the department stores, which enjoyed a like-for-like sales hike of 6.4 per cent. "We had a phenomenally successful July at John Lewis partly because the weather wasn't good," Mr Mayfield said.
The strong performance should go some way to ensure that staff members will all be in line for a bumper payment when the company reports full-year results. All partners share in a bonus, which last financial year amounted to about 18 per cent of salary. Mr Mayfield added that Waitrose was ahead of its competitors in terms of its organic ranges and local sourcing. Its organic range now consists of 1,700 products, and all its meat is sourced in Britain.
Although Waitrose matches its rivals on branded products, Mr Mayfield said: "Customers are prepared to pay for quality."
Richard Ratner, at Seymour Pierce, called the results a "very good performance". "Given the weather, we believe that this is a much better performance than its rivals," he added. "John Lewis will have benefited from its skewing towards 'home', as there has been a noticeable shift of spend to this area during the wet summer."