John Lewis has raised its second-half sales expectations as it believes its core middle-income shoppers will be less scathed by the austerity measures than it first feared.
Director of retail operations Andrew Murphy told reporters: “Because of the balance between spending cuts and tax rises the blunt fact is that the John Lewis core consumer has been slightly more protected than we might have thought they would be.”
The department store chain reported in September a 28% rise in first half profits. At the time it forecast a 4% rise in underlying sales for its second-half to the end of January 2011. It has since delivered like-for-like sales growth of about 10% for its third quarter.
With comparative numbers much tougher in the fourth quarter, Murphy said the retailer was currently tracking a rise of about 6% for the second half. He said: “I wouldn’t entirely rule out an upside on that. Whatever UK retail Plc comes out with, we will come out right at the top end of that.”
He added: “We’re going to outperform the market, probably outperform some of our competitors by some distance.”
Murphy said John Lewis’ past experience was that tax rises had more impact in the short term than government spending cuts.
The impact of public sector job losses on consumer demand would start to be felt in 2011 and would show significant regional variance, he added, with Southampton, Glasgow, Newcastle, Cardiff and Liverpool expected to be hit hard.
It is anticipating like-for-like sales growth of about 1-2%, excluding VAT, for 2011. Total sales would be boosted by opening at least four home stores, and more products online, he added.
He said more conservative forecast for 2011 is shaped by concern about the UK housing market. Murphy said: “We are predominantly still a homewares retailer and the housing market and movement in it drives significant parts of our big ticket.”
Opening home stores is a response to the slowing pipeline of full-line stores, although its Stratford shop is on track to open in September 2011. But eight other projects have been delayed.
Murphy said the firm was exploring opportunities overseas but the focus was on developing its internet offer rather than establishing stores.
He said: “We see no reason that what we do could not work in very many territories overseas, but we would always want to lead online there as a much less risky way to experiment.”