Comment & analysis - Powerful own-brand at heart of JLP growth plan

John Lewis is very good in bed - in fact the department store division of the John Lewis Partnership performs well in the home furnishings sector as a whole.

The group claims to be the biggest retailer of own-brand sheets, towels and duvets in the UK. At its results presentation earlier this month, chairman Sir Stuart Hampson pointed out that more people slip between JLP sheets than those of any other brand.

John Lewis is now in the second phase of a five-year strategy to turn around its 26 department stores. Despite taking what managing director Luke Mayhew describes as 'deliberate hits' to its stores in an effort to drive long-term profit growth, the retailer increased market share at Christmas and in the January Sales. Like-for-likes were up 4 cent in 2002.

All of its regional stores have now been unified under the John Lewis fascia and trading hours extended, with eight branches open seven days a week. The£100 million rolling refurbishment of Peter Jones on London's Sloane Square is expected to be completed in 2004 and the£25 million upgrade of John Lewis in Edinburgh is under way.

The capital expenditure -£114 million on stores in 2002 alone - is already bearing fruit, with sales from the reopened Centre Room of Peter Jones up 29 per cent.

Mayhew is now looking to develop the 'core strength' of own-brand product.

Indeed, at a time when brands are big business in department stores, John Lewis's own range, with its quality reputation, has emerged as a premium brand in its own right.

'The real strength of our own brand is in furnishings and textiles,' says Mayhew. 'We are looking to extend it to other areas of home furnishings and introduce own-brand to other parts of our assortment.'

He is well aware of the challenges ahead, particularly in the competitive fashion sector. 'In the fashion business there is more stock than demand at the moment. It is a real balancing act between great product, selling through quickly and being able to enter the new season without overhang.'

John Lewis has developed several key in-house fashion ranges, including JFW and Equation for women, Guise menswear and baby range JFB. Mayhew would only say that 'some ranges are more successful than others', but singles out Guise and JFB for praise, adding that there is real 'scope for growth'.

Waitrose blossoms

Grocery division Waitrose is also holding its own. Managing director Steven Esom reported an increased market share. Sales were up 5 per cent and like-for-likes rose 4 per cent, with a leadership position in fresh foods.

JLP has also developed the hybrid store format Food & Home successfully, combining a Waitrose offer with a selection of John Lewis homewares. There are now two prototypes, at Canary Wharf and Cheltenham, which Hampson describes as trading 'above expectations'.

Rolling out the format is constrained only by the availability of sites and, with a two-year turnaround time, no new openings are expected until at least 2005.

Room for improvement

One analyst says there is room for own-brand expansion at John Lewis, but suggests the Jonelle offer, which extends from bedding to kitchenware and clothing, needs a makeover.

He says: 'Jonelle is a good quality brand - as you'd expect - but it needs to be updated. There's some evidence of experimentation within menswear and I think that's a step in the right direction. There's some flexibility to increase the amount of own-label - for example most of the toys it sells are proprietary brands.

'Most department stores trade in proprietary brands and the problem with introducing own-label is that you are looking across an awful lot of areas. The challenge would be bringing economies of scale, especially from low-volume production.

'Admittedly the margins on own-label are better than on proprietary brands, but you need a supply infrastructure that works to make it worthwhile. If products are going to carry your own name, you don't want inferior quality to detract from the strength of a brand like John Lewis.'

After celebrating their recent successes, it's extremely unlikely that the Partnership's bosses will let that happen.