John Lewis Partnership unaudited interim results for the 26 weeks ended 29 July 2023
Thursday 14 September 2023
- John Lewis Partnership reports improved financial performance for the half year
- Losses before tax and exceptional items fell from £66.8m1 to £57.3m (a 14% improvement)
- Losses before tax narrowed by 41% from £99.2m to £59.0m
- Strong balance sheet: liquidity of £1.3bn, pension scheme valuation confirmed a surplus
- Cash generated from operations was £97.4m, £76.7m better than last year
- Partnership sales2 topped £5.8bn in the half, up 2% year-on-year
- John Lewis Partnership reports improved financial performance for the half year
- 600,000 new customers to reach 21.4 million
- Transformation progressing: efficiency savings of £31.2m, over £100m expected by year end
- Customers are spending more on themselves (beauty, fashion and dining in) but holding back on technology and big ticket home items
- Waitrose trading operating profit improved from £431.7m to £504.4m; John Lewis trading operating profit fell back from £295.0m to £277.1m
- Economic outlook uncertain, but improvement in full year financial results expected
- Owing to inflationary pressures the Partnership Plan will take two additional years to deliver - in 2027/28 rather than 2025/26
- Three million meals donated to communities in need; supporting young people with care experience
The John Lewis Partnership reports an improved performance for the half year, narrowing losses before tax by 41% to £59.0m. Before tax and exceptionals, losses fell to £57.3m (£66.8m a year earlier), a 14% improvement.
Liquidity was strong at £1.3bn (£1.5bn a year earlier) with borrowings unchanged at £650m. Cash generated from operations was £97.4m, £76.7m better than last year. We invested £196.9m in our transformation. After investments and financing activities, we had an outflow of cash in the first half of £232.4m, an improvement of £238.4m compared to last year. The Partnership generates most of its cash in the second half.
Total sales were £5.8bn, up 2% year-on-year; revenue3 was up 3%. 600,000 more customers shopped with us in the half, taking the total number of Partnership customers to 21.4 million.
PARTNERSHIP PLAN
Last year the Partnership was hit hard by inflation, which was at its highest since 1980, increasing our costs by £179m. This additional cost has sharpened our focus on the Partnership’s long-standing productivity challenge. For context, between 2000 and 2019, Partner numbers (on a full time equivalent basis) rose by 24,300 to 60,800 to support a rapid growth in stores and online. Profits remained broadly flat during this period, squeezing profit per Partner. A combination of inflationary pressures and greater than expected investment requirements for our transformation means it will take a further two years to deliver the Partnership Plan - to 2027/28 rather than to 2025/26.
As set out in our year end results in March, the Plan has been significantly adapted to give greater weight to productivity and efficiency under our Lean Simple Fast programme. The Plan will now achieve an additional £600m of efficiencies over its life (with £308m already achieved through to March this year).
£31.2m has been realised in the first half through a combination of process simplification, margin efficiencies (Partnership’s overall margin rate improved by 0.15 percentage points on the year) and supplier negotiations.
Our plans are on track to scale efficiencies in the second half, delivering over £100m benefit by the end of the year. We are also investing to modernise technology and data through new partnerships with Google Cloud and dunnhumby; and progressing build to rent and expanding financial services building on the strength of our retail brands.
Waitrose
Waitrose sales were up 4% to £3.7bn. Sales growth was driven by average item price up 9%, with volumes down 5%.
As the half progressed we saw improving volume trends, with good momentum going into the second half. £100m is being invested in price cuts to ease cost of living pressures on our customers: the ‘New Lower Prices’ campaign drove product sales growth of 12% and volumes up 13% year-on-year. The second half sees the third tranche of price cuts and a major new launch - the Japan Menyū range.
Availability4 closed the half at 96.1% (from 93.6% last year). This was despite an IT incident, which reduced profit in the half by £11.6m.
Waitrose is responding to the slow down in dining out with ten new ‘dining in’ deals, leading to a tripling in sales. The new £5 lunchtime meal deal has started strongly in its first week with ‘food to go’ sales up 34% year-on-year. We are continuing to make progress in bringing Waitrose to new customers through expanded collaborations with Dobbies, Shell, Deliveroo and, since July, UberEats.
Waitrose remains as committed as ever to quality and high ethical standards, even with cost of living pressures: our customers demand it. Compassion in World Farming recognised Waitrose as the best retailer for animal welfare.
John Lewis
John Lewis sales were £2.1bn, down 2%. On the one hand, customers continued to spend on themselves: fashion was up 3% and beauty was up 2% - partly driven by 50 new brands including JoJo Maman Bébé and Le Specs. The second half will see further launches including Vivere, an exclusive with Savannah Miller.
On the other hand, customers were more cautious about ‘big ticket’ items in Home and Tech (down 5% and 4% respectively); in effect it’s been a case of ‘more loafers and fewer sofas’. Interest bearing credit is now available online and will be available in store from mid-October - ahead of peak - to help customers spread the cost.
The balance between store and online purchases remained broadly unchanged: at 43% and 57% respectively. Shop sales improved by 2% driven by increased footfall while online declined 4% owing to weaker conversion.
Customers were drawn to shops for personal styling appointments (up 27%), beauty services (up 23%) and nursery consultations (up 17%). Customer service remains an area of significant focus: more than 5,700 Partners attended our training academy in the first half.
Partnership Values
We also take seriously our obligations to our Partners and communities. Over three million meals were donated to those in need. Around 1,200 Partners have been taking part in apprenticeships during the half. Of over 100 young people with experience of the care system who took part in our employability programmes, we’re pleased that 19 found jobs in the Partnership.
OUTLOOK
While the economic outlook and consumer sentiment remain uncertain, on the back of stronger Waitrose trading and further efficiency savings in the second half, we expect an improved full year financial performance compared to a £77.6m loss before tax, Partnership Bonus and exceptionals last year. We typically make most of our profit in the last three months of the year so a successful peak is always critical.
Our strategy of financial prudence means we expect to maintain strong liquidity through the second half, and achieve an improved Debt ratio by year end. Key terms of the three-yearly pension valuation have been agreed, resulting in a surplus. We expect to complete the valuation in the second half with £10.0m annual deficit repair payments no longer required.
Our priorities for investment remain to modernise the business, improve customer service and do more for Partner pay, where we can. These demands are significant and take precedence over the Partnership Bonus.
Sharon White, Chairman of the Partnership, said: “The Partnership is a unique model that has been tested and come through stronger many times in our 100 year history. While change is never easy - and there is a long road ahead - there are reasons for optimism. Performance is improving. More customers are shopping with us. Trust in the brands and support for the Partnership model remain high.”
Nish Kankiwala, Chief Executive of the Partnership, said: “Our transformation to modernise our business is well under way, and I want to thank our Partners for their efforts to give customers great service, quality and value when they shop with us in store or online. There are no brands better placed than Waitrose and John Lewis to provide customers with what they need right now - to help them feel good and eat well.”
1. The previously reported loss before tax, Partnership Bonus and exceptional items of £92.4m for the half year to July 2022 has been restated per note 1 of the interim consolidated financial statements
2. All references to sales are Total trading sales which includes VAT, sale or return and other non-cash accounting adjustments
3. Revenue is Total trading sales, less VAT, sale or return and other non-cash accounting adjustments
4. Measured as the number of products that are in stock, and available for purchase divided by the total number of products we offer.
Notes To Editors
The John Lewis Partnership owns and operates two of Britain's best-loved retail brands - John Lewis and Waitrose. Started as a radical experiment over a century ago, the Partnership is now the largest employee-owned business in the UK, with around 74,000 employees who are all Partners in the business. The Partnership is purpose-driven, existing to create a fairer and more sustainable future for our Partners, customers, suppliers and communities. Our Purpose not only inspires our principles, drives our decisions and acts as our guide to be a force for good, it steers us to do things differently and better - all in service of creating a happier world for everyone and everything we touch. We operate JohnLewis.com, Waitrose.com, 34 John Lewis shops and 329 Waitrose shops, including a growing number offering a selection of John Lewis products. Waitrose has partnerships with Dobbies Garden Centres, Shell, Uber Eats and Deliveroo as well as supply agreements with Margiotta stores in Scotland and Alliance shops in Jersey. Outside of retail, John Lewis Financial Services continues to grow providing insurance, the Partnership credit card, foreign currency and investments, and is currently proposing to deliver 1,000 new rental homes across three local communities.