Press releases

John Lewis Partnership sets out its future: Better products and service, driven by Partners and sound finances

Wednesday 27 June 2018

 

The John Lewis Partnership today outlined the next phase of its strategy, designed to develop and strengthen the business.
The key points are:

  • Focusing on differentiation, not scale: An increased focus across the whole business on competing through differentiation and innovation, not scale
  • Maintaining higher level of investment in product and service innovation: Continue to invest at a rate of £400m-£500m per year, take further steps worth £500m over three years to strengthen the balance sheet, while recognising the short-term pressure on profits
  • Partners at the heart: Recognising and enhancing the role Partners play in the differentiation of both Waitrose and John Lewis
     

The Partnership starts in a strong position. It has two excellent brands in Waitrose and John Lewis with a proven capability to develop unique products in food and non-food that are highly valued by customers. The business has a store estate that is better sized and better quality than its competitors, combined with a leading capability online. Through its Partners - who are all co-owners in the business - the Partnership has a greater level of expertise and achieves higher service standards.

Focus on differentiation, not scale

It is widely acknowledged that the retail sector is going through a period of generational change and every retailer’s response will be different. For the Partnership, the focus is on greater differentiation – not scale.  We have clear plans to build on our strengths and to sharpen our points of difference in both Waitrose and John Lewis. These plans include further investment in and development of unique products and service, together with a greater emphasis on own brand and innovation.

Waitrose will focus on core customers. Over half of Waitrose’s products are now own brand and plans to extend further the range of exclusive products while continuing to raise the quality. This will include a greater focus on health and wellbeing, a fast growing category that appeals strongly to core customers.

This will be delivered with an extraordinary level of service. In our shops, every Waitrose Partner will be a Food Ambassador and there will be an increase in the number of specialists to advise customers. As part of this, Waitrose.com continues to be a focus, with a greater emphasis on serving core customers. As a result, our online sales are currently growing at 21% on last year, higher than any established grocer.

At John Lewis, the focus will be in three key areas - unique products, personal service and expanding into new services. At the heart of the strategy is developing a curated and targeted assortment, which is increasingly unique to John Lewis. Key to this is supercharging women’s fashion, acquiring new niche brands, securing exclusives with international brands and significantly growing design capability. Customer reviews of John Lewis own brands this year exceeded that of other brands, scoring an average rating of 4.5 out of 5. Currently 30% of John Lewis’s sales are from products that are own-brand and exclusive products. Our ambition is to increase this to 50%.

Our service will centre around creating an exceptional experience in shops, empowering Partners through technology and investing in Partner skills. Work has started to tap into the burgeoning customer demand for trusted advice and expertise in fashion and home. This is a significant opportunity and will play a major role in our shift to personalised service versus ubiquitous transactional shopping.

And John Lewis will expand beyond shops and online into new and enhanced services, with a focus on strengthening its position in the home services market and growing financial services. The acquisition of home improvements business Opun earlier this month is one step in this direction.

Profit and sustained investment

These innovations rely on sustained investment. The Partnership’s financial strategy is designed to ensure that the business is able to maintain investment whatever the economic environment. The Partnership has already taken steps to strengthen its balance sheet by £750m over the last three years to ensure the necessary financial firepower to invest while also reducing debt. We are also committed to maintaining a Debt Ratio position of around three times within around five years.

We expect the Partnership’s half year profits before exceptional items – which are always much lower and more volatile than the second half – to be close to zero this year. For the full year there are a wide range of possible outcomes, given the market uncertainty, but we are currently assuming that profits before exceptional items will be substantially lower than last year. The Partnership currently expects to see profit growth in Waitrose, a decline in John Lewis and significant extra costs at the Partnership level as a result of greater IT investment, which will be a big driver behind the overall profit change.

Today the Partnership has announced that it will take steps to strengthen its balance sheet by a further £500m over three years to invest in product and service innovation. This will be achieved by rebuilding profitability at Waitrose, creating more value from the property estate, and conducting a review of the Partnership’s pension scheme.

As a result, the Partnership expects its cash position for this year to be in-line or ahead of last year and its liquidity position to be the best it has been for 10 years. This will allow us to maintain investment at a rate of £400m-£500m a year. We expect our level of capital investment as a percentage of sales will be more than 10% ahead of typical competitors.

Shop estate

Unlike many of its competitors, the John Lewis Partnership has a well balanced and well located store portfolio, with 353 Waitrose shops and 50 John Lewis. As we develop our plans to prioritise differentiation we will continue to make adjustments to our overall estate, including exit or closures, but at a rate that’s in line with what we have seen over the last few years. To this end, Waitrose today announced the disposal of four convenience shops and one small supermarket.

Partners at the heart

The inherent strength of the John Lewis Partnership is its Partners. They are the Partnership’s point of difference and its competitive advantage and investment in them will continue. For example, this year the average increase in total hourly pay for Partners who have worked in the business for more than one year was 4.5%. We will continue to invest in pay and have set an ambition to make the Partnership one of the healthiest places to work by 2025.

As a sign of the Partnership’s intent, from September 2018 the two brands that make up the business will be known as Waitrose & Partners and John Lewis & Partners. More details will be announced in the coming months.

Sir Charlie Mayfield, Chairman of the John Lewis Partnership, said:

'The John Lewis Partnership is a unique business with different ownership, a different purpose and a different outlook to any of our competitors. As retail changes we need to tread a path that enables us to thrive as a business while building on the qualities that make us different. For us, the relentless pursuit of greater scale is not the right course. Our plans put differentiation, innovation and Partner led service at the heart of our offer. The measures that we have outlined today are an important next step in our strategy that will ensure we emerge stronger from this period of profound change.'


Notes to editors

The John Lewis Partnership operates 50 John Lewis shops across the UK, johnlewis.com, 353 Waitrose shops, waitrose.com and business to business contracts in the UK and abroad. The business has annual gross sales of over £11.5bn. It is the UK's largest example of an employee-owned business where all 85,500 staff are Partners in the business.

Waitrose has 353 shops in England, Scotland, Wales and the Channel Islands, including 65 convenience branches, and another 27 shops at Welcome Break locations. It combines the convenience of a supermarket with the expertise and service of a specialist shop - dedicated to offering quality food that has been responsibly sourced, combined with high standards of customer service. Waitrose also exports products to more than 50 countries worldwide and has nine shops which operate under licence in the Middle East. Waitrose's omnichannel business includes the online grocery service, waitrose.com, as well as specialist online shops including waitrosecellar.com for wine, waitroseflorist.com for plants and flowers and waitrosegifts.com for gifts. In recent months, Waitrose has been awarded the much-coveted European-wide Compassion in World Farming 'Best Retailer Award', Soil Association's 'Best Organic Supermarket Award 2017' and The Drinks Business' 'Retail Buying Team of the Year Award'.

John Lewis operates 50 John Lewis shops across the UK (36 department stores, 12 John Lewis at home and shops at St Pancras International and Heathrow Terminal 2) as well as johnlewis.com. The retailer stocks around 350,000 separate lines in its department stores and on  johnlewis.com across fashion, home and technology.  This year John Lewis won, 'Best Multichannel Retailer 2018', 'Best Clothing Retailer 2018', and 'Best Furniture Retailer 2018' at the GlobalData Customer Satisfaction Awards 2018.  John Lewis Insurance offers a range of comprehensive insurance products - home, car, wedding and event, travel and pet insurance and life cover - delivering the values of expertise, trust and customer service expected from the John Lewis brand.

*GlobalData Retail Customer Satisfaction Awards 2018

You can follow John Lewis on the following social media channels:
www.johnlewis.com/twitter
www.johnlewis.com/facebook
www.johnlewis.com/youtube


Enquiries:

For further information please contact:

John Lewis Partnership
Simon Fowler, Director of Communications, 07710 398460
Clayton Hirst, Group Head of Corporate Affairs, 07947 708167
Sarah Henderson, Group Senior External Communications Manager, 07764 676036

Citigate Dewe Rogerson
Simon Rigby, Joint Managing Director, 07771 784446
Jos Bieneman, Director, 07834 336650
Ellen Wilton, Associate Director, 07921 352851

John Lewis
Gillian Taylor, Head of External Communications, 07919 057931
Lexi Finnigan, Communications Manager, 07720 339257

Waitrose
Christine Watts, Communications Director, 07764 676414
Gill Smith, Senior Corporate PR Manager, 07887 898133

Debt investors
Alan Drew, Head of Treasury & Corporate Finance, 07525 582955
Lynn Lochhead, Deputy Head of Treasury, 07834 770684

For further information download our strategy presentation