You’ve been exceptional in what has been another very tough year. Two years of pandemic and now a cost of living crisis.
I know you’re feeling the impact of higher inflation, and I hope the £500 (pro rata) cost of living payment and free food over the winter helped.
Inflation has had a big impact on the Partnership and sent our costs soaring - up almost £180m on last year. We haven’t sat on our hands. We’ve been working hard to drive out costs. Negotiating better deals with suppliers and simplifying ranges in both brands.
Shoppers felt the pain of inflation. Sales1 were £12.25bn, a 2% dip on the year: a combination of strong sales at John Lewis and a decline of 3% at Waitrose, reflecting that we had more customers - 20 million of them, 800,000 more than last year - but they bought less. The big online growth of the pandemic years was partly reversed. Shoppers shifted some of their grocery spending to the discounters.
It is also the case that we had some set-backs. Product supply challenges and a major fire in our Brinklow warehouse hit availability in Waitrose last summer. This was recovered through autumn and availability is now strong.
All in all, this has made for a tough set of results. We made a loss2 of £78m. When you add in exceptional costs - the biggest one being a write down in the value of Waitrose stores - the loss3 was £234m. Our balance sheet remains strong - £1bn of cash and access to a £420m credit facility, like an overdraft, if we need it.
I am sorry that the loss means we won’t be able to share a bonus this year or do as much as we would like on pay. We’ll continue to help with the cost of living in other ways - the financial assistance fund will stay at £800,000 (a doubling) and there is support for travel, childcare and living costs.
Far from diverting us from the Partnership Plan, the economic backdrop has galvanised us to go faster. The Plan is about two things - increasing the appeal of our brands and building on them to diversify into new services. Last year, we invested more than £500m in our transformation.
Waitrose is expanding in the all important convenience market through tie-ups with Dobbies (garden centres) and Shell, and getting exclusive brands (Gail’s, Plants by Deliciously Ella). John Lewis has set out a clear pricing approach (good, better, best), brought stronger styling and design to own-brand Fashion and Home and introduced over 200 new brands. Both brands relaunched - John Lewis (for all life’s moments), Waitrose (food to feel good about).
Great customer service is at the core of who we are, and always will be. John Lewis was voted top UK retailer for customer service. Waitrose won more Grocer 33 Store of the Week awards than any other supermarket.
A new £500m venture with abrdn secured investment in our ‘build to rent’ property business. And financial services - a business we’ve been in for nearly 20 years - is growing well, with popular products like our relaunched pet insurance. 600,000 customers joined our new Partnership (credit) Card. Not a smooth process for everyone, but customers are - on average - now spending more than before.
Those of you who have been in the Partnership for a while will know that the business expanded rapidly between 2000 and 2015, going from 151 to 379 stores. We now have catch-up investment to make and have the potential to modernise the business at greater pace.
Given the economic backdrop, it would have been easy to step back from our principles where these carry a price tag. That is not the Partnership way. Instead we chose to invest in British farmers so they did not have to compromise on their high animal welfare standards. We launched a programme to provide jobs for young people who have grown up in the care system, and the ‘Building Happier Futures’ fund has raised over £1m.
Looking ahead, the external environment is no less uncertain. Even as headline inflation is starting to fall, the Partnership is still seeing costs rise.
Faced with a more challenging environment, we have adapted the Partnership Plan to improve the profitability of the business, tripling our target for efficiency savings from £300m to ~£900m (by January 2026). The mantra for the year is cost out, margins up and customer focus.
We’re showing renewed confidence. A £100m price investment in Waitrose - demonstrating that value with values (quality and sustainability) go hand in hand. John Lewis Horsham has undergone a multimillion pound revamp and is testing new concepts like play spaces for children that will be tested in other stores. Going big this spring on nursery, childrenswear and advice for families.
Simplifying the way we run Waitrose shops - less time on process, more time with customers. Investing in data and loyalty so we can give customers more of what they want. More simplification of our ranges. Sale of Partnership assets will give us more money to invest in our transformation.
As we need to become more efficient and productive, that will have an impact on our number of Partners. That’s a massive regret to me personally. It would be difficult enough in any business. It’s particularly tough in the Partnership, when everything we do is with one goal in mind: ‘happier people, happier business and happier world’.
We’re not just employees; together we own the Partnership. That’s a huge responsibility as well as privilege - in the good times and when it’s tough. I feel it acutely. By seizing the opportunities to transform, we will secure the Partnership’s future for another 100 years.
PARTNER & CHAIRMAN