John Lewis back in profit, fashion sales rise

John Lewis Partnership (JLP) is one of the most closely watched retail giants in the UK at the moment, mainly because of its many problems in recent years. But at least on Thursday its annual results managed to show it returning to profit, as expected.

The 52 weeks to late January showed profit before tax and exceptional items of £42 million, which was a big improvement on the £78 million loss in the previous year. And profit before tax excluding one-offs was £56 million, £290 million better than the prior year.

Operating profit margins rose by 1.2 percentage points during the period and Partnership sales were £12.4 billion, this was up only 1% on last year, but the margin increase was also crucial in driving it to profitability.

The company said that a million more customers shopped with it in the year, taking the total to 22.6 million people. It also had good news on the cash front with net cash generated from operating activities more than doubling to £433 million. And its total liquidity increased to £1.7 billion, giving it the financial flexibility to self-fund its transformation.

That’s particularly crucial for the business as its mutual status in which it’s owned by staff (known at Partners) means it can’t raise funding by methods such as issuing shares or bringing in outside investors.

The company said that the improved performance will allow it to accelerate investment with a spend of £542 million planned this year, up from £312 million in 2023/24. Importantly as well for its staff, it will be able to invest in higher pay. But it’s not paying a bonus again this year and said that investing in pay and business improvement is more important.

Looking at the results in more detail, the owner of the John Lewis department stores and Waitrose supermarket chains said that while sales for the company rose by only 1%, total revenue for the business was up 2% at £10.8 billion. The gross margin rate increased by 0.6 percentage points. Profit growth was supported by a further £111m of productivity improvements in the year. 

Waitrose sales were up 5% to £7.7 billion and it has now delivered eight consecutive quarters of growth in customer numbers.

Fashion and beauty sales up

But times were tougher for the John Lewis chain, although the company said that “in a challenging year for the sector, we delivered improved profitability in John Lewis helped by improved gross margin rate and productivity”. 

That said, John Lewis sales were down 4% at £4.8 billion. Yet there was some good news as sales in Fashion, including Beauty, were up on the year. And while it saw weaker sales in Home and Technology, John Lewis attracted a record 13.4 million customers, “underlining the reach of the brand”.

The John Lewis chain’s trading operating profit of £689 million was £13 million better year-on-year “as we converted sales into greater profit. Gross margin improvement of one percentage point and efficiency savings across supply chain and stores underpinned this improvement”.

It introduced over 170 new brands and as customers continued to turn to it for “independent, unbiased advice, over 200 of our Partners are now dedicated to fashion personal styling (appointments up 27%), nursery (appointments up 25%) and home (appointments up 5%)”.

It also introduced new instalment payment options and continued to enhance customers’ experience across the John Lewis app and website. Fifty-three percent of its customers use digital channels for their shopping, with app use a growing component of sales.

Looking ahead

As for the future, we’ve already heard that the company will be investing more money in growth in the year ahead. Much of the extra cash will “focus on modernising our technology, refreshing our shops and simplifying how we work”.

For the John Lewis business specifically, it said it will “improve our offer to customers with around 80 new brands and strengthened own-brand, while revitalising our Home category. We’re improving visual merchandising in stores, investing in technology to improve customer service and continuing to invest in value. We will invest in improving our online experience through easier navigation and personalised product recommendations”.

And while it has been criticised for moving away from its core focus on retail via financial services and build-to-let homes, it still sees this as an important part of its growth strategy. 

In 2023/24, income across its portfolio of financial services products was up 15% and it attracted over 97,000 new Partnership Card customers, taking the total to just under a million. Alongside this, it said “turning retail property into residential homes will improve the strength of our balance sheet”.

Chairman Sharon White hailed the “significant progress” that “shows our plan is working, while we know there’s much more to do”.