John Lewis revealed its full-year results this morning, posting a lower staff bonus despite an uplift in sales and profits.
The Partnership cut the bonus it pays staff to 6%, having warned in January that it was likely to be “significantly lower” this year.
The John Lewis department store business recorded a 2.7% uplift in like-for-like sales across the year, as revenues rose 3.2% to £3.78bn.
Sister retailer Waitrose suffered a 0.2% dip in like-for-like sales over the same 52-week period, but total revenues were up 2.6% to £6.24bn.
“Bonus is down. The board has decided to retain more profit in the business this year than before and that is to ensure we have the firepower to make sure we can invest in the future success of the Partnership”
Charlie Mayfield, John Lewis Partnership
The picture on profits varied depending on the measure used. The group’s profit before tax rocketed 65.4% to £488.2m during the 52 weeks ending January 28, while profit before tax, bonus and exceptional items grew 21.2% to £370.4m.
However, John Lewis department stores’ operating profit before the bonus and exceptional items fell 2.8% to £243.2m, while Waitrose’s advanced 9%.
This morning, the Partnership said it calculated that “trading profit” had advanced 1.9% and that was the most telling figure and the one it was using internally.
Here, Retail Week takes a closer look at all you need to know about the past year – and the future – of one of Britain’s best-loved retailers.
The bonus is down – and John Lewis can’t say when it will be restored
The Partnership bonus of 6% is equivalent to three weeks’ salary. The table below shows just how severe that cut is, when compared with previous years.
“Bonus is down,” said chairman Charlie Mayfield this morning. “The board has decided to retain more profit in the business this year than before and that is to ensure we have the firepower to make sure we can invest in the future success of the Partnership.”
He was unable to say when the bonus might return to normal levels, however.
“I am not saying that bonus will automatically rise next year.” he said. “But we absolutely intend to see bonus rising over time. Our plans are aiming to achieve exactly that. We never forecast bonus and we are not going to now.”
The strategy has been a lengthy undertaking
Unsurprisingly, the John Lewis executive team has been planning its strategy for a long time. Mayfield spoke today about embracing the changes enveloping retail and taking advantage of them.
His words echoed those of Retail Week Live keynote speaker Shop Direct boss Alex Baldock, who told delegates at the event yesterday that technology such as AI would change retail and would “do so with your deliberate choice or it can just happen to you”.
“Over two years ago we looked carefully at the future, we actually looked well into the future and what we identified is that there were a number of changes taking place in society, in the workplace and in retail”
Charlie Mayfield, John Lewis Partnership
Mayfield said: “Over two years ago we looked carefully at the future, we actually looked well into the future and what we identified is that there were a number of changes taking place in society, in the workplace and in retail.
“Our view was that those changes are going to be profound.
“Anticipated early, those changes can be massive opportunities for our business. Ignored, they will create the conditions for constant pressure and continued tough trading.
“We’ve been working on developing a different direction ever since then and there are already signs of that direction beginning to emerge.”
There will be fewer John Lewis store openings in the coming years
John Lewis’s new managing director Paula Nickolds will be presiding over a very different Partnership than that of her predecessor Andy Street.
She made her first media appearance this morning, though her vision for the department stores is yet to be revealed.
“Looking forwards we will probably open fewer shops than we have done in the past”
Paula Nickolds, John Lewis
She did concede, however, that there will be fewer John Lewis stores opened in the coming years.
John Lewis opened impressive, experience-led stores in Chelmsford and Leeds last year and is set to open branches in Oxford, Westfield White City and Cheltenham.
“We see stores as a really important part of our total proposition,” Nickolds said. “We have three shops in the pipeline and we’re really excited about those shops.
“But looking forwards we will probably open fewer shops than we have done in the past.”
John Lewis has not succumbed to fashion market woes
Fashion sales were up 3.8%, while womenswear shot up 6% – an impressive result for a mid-market, multichannel retailer.
Nickolds attributed some of this strength to the retailer’s own-brand offering.
“Our focus is on exclusive product, whether it is own-brand or exclusives with brands that give customers a reason to come to John Lewis,” she said. “That is increasingly important in a world of increasing commoditisation.
“Our own-brand performance was a source of real pride last year. You can the see serious investment there and you will see more of the exciting development to come.”
She added that further own-brand developments would be revealed as early as later this spring.
Current trading is down
Trading for the first five weeks of the year does not look great at face value. Total sales rose 0.5% at John Lewis and 0.4% at Waitrose, but on a like-for-like basis both were down 1.4%.
John Lewis management were at pains to point out that these figures were based against a previous five weeks that had included Mothers’ Day and Easter, and said the picture would look much clearer come the end of April.
Waitrose managing director Rob Collins said it was “too early to tell” and added that both events were “really significant” for the grocer.
No pain, no gain
It’s clear from revelations on the bonus and store openings that spending priorities across the Partnership are changing and that the group is battening down the hatches somewhat.
“We are absolutely determined to keep our investment up in our current physical estate and winning online”
Patrick Lewis, John Lewis Partnership
“We want our balance sheet to be stronger so we can keep investing in the business in the way we went to,” group finance director Patrick Lewis said.
“We are absolutely determined to keep our investment up in our current physical estate and winning online.”
Mayfield emphasised the advantages of John Lewis’s partnership structure when strategizing for the coming years.
“Only we can take responsibility for our future success,” he said. “In the Partnership we own the business today, we will own it in 10 years’ time.
“There is no group of shareholders who will suddenly appear and say we will take charge of that future, it is down to partners in the Partnership today and tomorrow and we take that responsibility very seriously indeed.
“This ownership model we have means that we are able to act now, from a position of relative strength, to make changes we need to to ensure the partnership continues to succeed in the future.”