John Lewis Partnership plc interim results for the half year ended 29 July 2017

Thursday 14 September 2017

John Lewis Partnership plc
Unaudited condensed Interim Financial Statements for the half year ended 29 July 2017

Financial Summary


  Waitrose John Lewis Partnership
  £m YoY
£m YoY
£m YoY
Gross sales(1)
3,324.2 2.3% 2,070.9 2.3% 5,395.1 2.3%
LFL sales(2) 0.7%   0.1%      
Revenue 3,131.1 2.2% 1,645.3 2.4% 4,776.4 2.2%
Operating profit before exceptional items(3)(4) 100.8 (17.4)% 50.2 39.7% 125.4 (12.8)%
Operating profit(3)
88.1 (8.5)%
29.1 (10.2)% 69.0 (39.3)%
PBT(5) before exceptional items(3)(4)         83.0 (4.6)%
PBT(3)(5)         26.6 (53.3)%
Net debt         421.2 23.3%

(1) Gross sales includes sale or return sales and VAT
(2) Waitrose like-for-like sales excludes fuel
(3) Includes property profits of £0.9m in Waitrose and £10.5m in John Lewis (2016/17: £0.5m in Waitrose). Excluding property profits, operating profit before exceptionals down 17.8% in Waitrose and up 9.7% in John Lewis, and Partnership PBT before exceptionals down 17.2%
 Exceptional charges totalling £56.4m with £12.7m in Waitrose, £21.1m in John Lewis and £22.6m in Group. Restructuring and redundancy costs totalling £0.7m in Waitrose, £3.8m in John Lewis and £0.6m in Group for 2016/17 were previously reflected as non-exceptional operating expenses in the first half of last year and have subsequently been reclassified to exceptional items
(5) Profit before tax

Sir Charlie Mayfield, Chairman of John Lewis Partnership, commented:

'Gross sales were up 2.3% in both Waitrose and John Lewis; a solid performance in a difficult market. Our Partnership profit before tax and exceptional items was down 4.6%, but this was flattered by property profits and after excluding these it was down 17.2%.

As we anticipated in our full year results statement in March, the first half of this year has seen inflationary pressures driven by exchange rates and political uncertainty. These have dampened customer demand, especially in categories connected to the housing market. Against that backdrop, our market share(6) gains in Fashion stood out. The exchange rate driven increase in cost prices has also put pressure on margin. We have chosen to hold back on increasing prices across many areas.

Our results also reflect the acceleration of our strategy to ensure the Partnership's success in the future. This has included: changing the way we operate Waitrose branches, creating new flexible team structures with broader responsibilities; further changes in John Lewis to adapt the business for the future; and moving from divisional to Partnership functions across Finance, Personnel and IT. As a result, we incurred exceptional costs of £56.4m. Given the key role our Partners play, we are very focussed on managing the risk of these changes carefully.

Sales growth has continued in the first few weeks of the second half. We are well set for our all-important seasonal peak, but we expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year. In addition, we will incur higher pension accounting charges in the second half year, as a result of low market interest rates. These will all impact our full year profits.'

(6) British Retail Consortium

Financial Key Points

  • Gross sales growth of 2.3% and increased customer numbers 
  • Profit before tax and exceptional items down 4.6% to £83.0m
  • Exceptional charge of £56.4m mainly for restructuring and redundancy costs (2016/17: charge of £30.1m for the write-down of property and other assets, and related costs, and for restructuring and redundancy costs)
  • Net debt of £421.2m, £128.1m (23.3%) lower than 30 July 2016, reflecting our focus on cash generation and the reduction in capital investment. Increase in net debt since January 2017 of £170.6m (68.1%), as expected due to seasonality of our cash flows
  • Accounting pension deficit, net of deferred tax, of £881.3m, £23.8m (2.8%) higher than January 2017 with additional deficit contributions largely offsetting the impact of further decreases in the real discount rate used to value the liabilities. The estimated actuarial pension deficit is £290m at July 2017

Chairman's overview and strategic update

Partnership gross sales grew by 2.3% to £5.40bn, with Waitrose and John Lewis gross sales both up by 2.3%, and with both brands increasing customer numbers as we continued to deliver great service and launch new brands and products. Our customer net promoter scores, which measure service experience, remain strong in both Waitrose and John Lewis.

Partnership PBT before exceptional items was down 4.6% to £83.0m. Operating profit, before exceptional items and property profits, was up 10% in John Lewis, while in Waitrose it was down 18%, held back by lower margin due to higher cost prices, very few of which were passed on to our customers. We also incurred higher pension accounting charges(7) due to the effect of lower market interest rates. Conversely we benefitted from higher property profits and lower accounting charges for our long leave scheme(7).

As we explained in our Christmas trading statement in January, and again in March in our full year results, we are making a number of changes this year as part of accelerating our strategy to ensure the Partnership's future success. In Waitrose branches we are reducing management numbers and creating new flexible team structures with broader responsibilities. In John Lewis we are adapting the business to allow us to better serve our customers as their needs change. We are also moving from running some of our key support operations on a divisional basis and consolidating them to create leaner and more efficient Partnership functions across Finance, Personnel and IT. We have incurred exceptional charges of £56.4m in the first half of the year, mainly for restructuring and redundancy costs.

We have also continued to invest in pay, with the average hourly rate of pay for non-management Partners increasing to £8.87 after the April 2017 pay review. Since the year end, we have entered into discussions with HMRC with regards to our pay arrangements which have technically not complied with the National Minimum Wage regulations. As we work through this we continue to hold a provision, as described in our full year results.

Our strategy has three main objectives: 1) stronger brands and new growth; 2) better jobs, for better performing Partners, on better pay; and 3) financial sustainability. 

(7) Pension accounting charges are £9.2m higher and long leave accounting charges are £12.5m lower than the six months ended July 2016, largely due to volatility in the market driven assumptions used to determine the respective costs

Stronger brands and new growth

There are three aspects to this objective. The first is developing an increasingly distinct product proposition loved by customers. During the first half year we launched our first in-house denim lifestyle brand for women – AND/OR – and our first Spring/Summer collection for modern rarity in John Lewis, while in Waitrose we successfully re-launched our Food to Go range and a significant proportion of our Ready Meal range. The John Lewis own brand developments continue to perform comfortably ahead of our expectations and across the total John Lewis product mix, the John Lewis brand is the number one in total sales. In Waitrose, our essential Waitrose brand makes up 21% of sales by volume.

Secondly, we are systematically improving the quality of the experience and service proposition across both Waitrose and John Lewis. In Waitrose, 68 of our branches have received investment in the first half of this year, including the roll-out of fresh sushi counters which are now in over 50 of our branches. In John Lewis, large-scale refurbishments are underway in Nottingham and Edinburgh as well as 43 propositional enhancement projects across our full estate and our most service-led and experiential shop to date will open in Oxford in October this year.

Thirdly, we are extending the use of technology to enhance our ability to engage customers directly in shops and across all channels. Before our Peak trading period, we will continue the roll-out of Partner hand-held devices across all of our shops, which provide product information, stock enquiries and direct ordering capability, providing a platform for a range of enhanced customer services. Waitrose has also successfully trialled and will roll-out multi-functional devices in branches to make life easier for Partners and increase efficiency. We are also rolling out 'auto-check in' technology across Waitrose to support Click & Collect, which now accounts for over half of all John Lewis online orders.

The second half year will see acceleration in all of these areas, with a major campaign on essential Waitrose, where we are lowering the price of hundreds of lines, and Only Here - our high impact visual Autumn/Winter John Lewis campaign, which launched on 1 September.

Better jobs, for better performing Partners, on better pay

We have anticipated major and accelerating changes in the workplace as a result of technology changing both the way customers shop and how Partners add most value. It has never been more important that we equip Partners for the changing nature of work. We are taking several steps to address this including providing more time for development and strengthening career development support.

In the first half year, sales per average FTE(8) Partner increased by 7.1% to £90,200. Partners have worked hard and been resourceful in achieving this, and were assisted by deployment of more technology and the introduction of more productive ways to organise and to operate the Partnership.

We have continued to invest in pay. Average hourly pay for non-management Partners increased to £8.87 following the pay review in April.  

The second half year will see acceleration across this theme, including a re-launch of our Partner Development website and the creation of nine apprenticeship schemes covering areas such as retail and hospitality management, and distribution operations. We have already launched LGV Driver and Vehicle Maintenance Technician apprenticeships and plan to launch another four schemes by the autumn meaning that we are on track to have 500 apprentices enrolled by March 2018.

(8) Full time equivalent

Financial sustainability

We continue to target a long-term Debt ratio(9) of around three times. To strengthen our balance sheet we made £83.7m of pension deficit reduction contributions and acquired the freehold of one of our trading branches at a cost of £22.1m, thereby reducing our future operating lease commitments. In August 2017, given the Partnership's strong liquidity position, we made a cash payment of £53.6m to the pension scheme to prepay approximately five months of normal contributions. Net debt has reduced by 23.3% compared to last year.

Despite this, we continue to expect, our Debt ratio to worsen at January 2018 compared to last year due to the challenging trading conditions combined with the impact of higher pension accounting charges and restructuring costs as we adapt the Partnership for the future. Our Debt ratio will also be impacted by the accounting pension deficit at January 2018, which will be determined using market interest rates at that time. 

(9) The Debt ratio is a measure of the Partnership's total debt relative to its cash flow and stood at 4.0x on 28 January 2017. For definition see page 9 of our 2017 Annual Report and Accounts

Outlook 2017/18

For the first six weeks of the second half, Partnership gross sales were up 2.4%. Waitrose gross sales were up 1.2% (0.4% like-for-like, excluding fuel) and John Lewis gross sales were up 4.5% (2.6% like-for-like). We are well set for our all-important seasonal peak, but expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year.

Our full year profits will depend, as they always do, on the final quarter which typically accounts for well over half of our profits before exceptional items. We expect margin pressure to continue into the second half year and we will incur higher pension accounting charges, as a result of low market interest rates at the start of the year. These will impact our overall profits.

Financial Results

In the first six months of the year, Partnership gross sales were £5.40bn, an increase of £120.8m, or 2.3%, on last year. Revenue was £4.78bn, up by £105.0m or 2.2%.

Partnership operating profit was £69.0m, down £44.7m, or 39.3% on last year. This includes an exceptional charge of £56.4m, as explained in the table below (2016/17 exceptional charge of £30.1m). Partnership operating profit before exceptional items was £125.4m, down £18.4m or 12.8% on last year.

Exceptional items 2017/18 2016/17
  £m £m
Restructuring and redundancy (a) 
(55.5) (5.1)
Strategic review (b) (0.9) (25.0)
  (56.4) (30.1)

a) Charge of £55.5m for restructuring and redundancy costs, principally in relation to our branch, distribution and retail operations as well as functional restructurings in Finance, Personnel and IT, as we move from divisional to Partnership functions.
b) Charge of £0.9m in Waitrose for a further write-down of a property that is no longer intended to be developed following the strategic review carried out during the prior year.

Profit before tax was £26.6m, down £30.3m, or 53.3% on last year. Excluding the exceptional items it was £83.0m, down £4.0m or 4.6%.


Gross sales were up by 2.3% to £3.32bn and like-for-like sales were up 0.7%. Operating profit before exceptional items was down by 17.4%, held back by lower margin due to higher cost prices, very few of which were passed on to our customers. However this was offset by strong cost control across Waitrose including significant improvements in productivity.

Our Head Office costs were down 2.4% on last year and we saw an improvement in productivity in our shops, with items sold per hour up by 1.6%. Improved branch productivity is being driven by the successful roll-out of our flexible working programme. This has been happening throughout the first half of the year and will be completed by the end of September. This new model enables Partners to work across the entire shop where appropriate so that we can be even more responsive to customer needs. The early signs are encouraging both in terms of customer feedback and in productivity uplift.

In line with our strategy of investing more heavily in our existing estate we are on track to achieve a range of improvements in 130 of our branches, with 68 having received investment in the first half of this year. A further 62 are due to receive investment in the second half of the year.

Food service is an important strategic focus as it gives customers additional reasons to visit our branches. We have appointed our first-ever Director of Food Service to build on our progress to date - which includes sushi counters in over 50 branches - and to develop the capabilities to achieve our potential in this market. We have also invested significantly in our website, including in a more efficient and intuitive search facility. Our e-commerce grocery operation made good progress with our continued priority of growing our loyal core of online customers helping to build profitable sales growth of 4.3%. Our convenience shops also achieved strong results with sales up by 14.6% and 3.3% on a like-for-like basis.

Overseas, we export Waitrose products to 58 countries, and sales were up 9.1%, achieved through additional volume with existing customers.

The essential Waitrose range remains a strong differentiator. We have just launched a major campaign to remind customers of the quality and value of essential Waitrose, highlighted by lower prices on hundreds of lines.

In the half year we opened two convenience shops in Faringdon and Bromsgrove as well as a core supermarket in Haywards Heath. We have since opened convenience shops in Addlestone and, today, at Finchley Central. We closed our convenience shops in Cardiff, Queen Street and Palmers Green. We will be opening two more branches in Winchmore Hill and Banbury in the second half and closing four more branches in line with our previous announcement.

Looking ahead we continue to focus on our Waitrose points of difference by developing new products and further enhancing our customer experience through our team of Partners. We are well placed for Christmas trading with a high quality range of inspiring and delicious food for the festive period.

John Lewis 

In a market that remains challenging, John Lewis has delivered gross sales of £2.07bn, up 2.3% and like-for-like sales up 0.1%. We have also grown market share and customer numbers. Operating profit before exceptional items increased by 38.7% to £50.2m. This included property profits of £10.5m, and after excluding these, it grew 9.7% to £39.7m.

Sales during the Clearance period were particularly strong, with a compelling customer offer, up 4.5% compared to last year, with EHT a standout up 8.1%.

In the first half year, Fashion was up 3.5%, gaining market share, with standout performances in Womenswear, up 5.8%, and Beauty, up 10.0%. Despite a tougher market, Home sales remained flat. EHT was up 2.5%, supported by strong sales in Communication Technology, up 10.4%, with Wearable Technology, Mobile, and Imaging performing well.

Online sales represented 37.3% of total merchandise sales, up from 34.5% last year. We maintained our investment across all online channels, with the roll-out of mobile-optimised online buying guides and plans to launch digital myJL gift vouchers available to customers via our app later this year.  

Our shops are an invitation to customers to experience our brand and as part of our Summer-long National Treasures campaign, we hosted more than 150 customer events in our shops. These included customer styling sessions with Vogue, bespoke afternoon tea in our Wedgwood Tea Room at Peter Jones, and scent and wellbeing workshops.

We integrated Fashion into our 50,000 sq ft cutting edge photography and content studio based in Origin Park, London, enabling us to respond faster than ever to the growing customer demand for inspirational, design-led content.  

Only Here, our high impact visual Autumn/Winter campaign, launched on 1 September. It supports our ambition for 50% of our products to be exclusive to John Lewis, and celebrates the very best of our new season products, collections and brands that can only be found at John Lewis.

In addition to the roll-out of Partner hand-held devices across all of our shops, we are introducing new initiatives to enhance the customer experience including: two hour delivery slots, self-service Click & Collect kiosks in Waitrose and the ability to see more detailed product information and branch stock availability through the John Lewis app. 

We are confident that our relentless focus on the customer and differentiating our brand from our competitors will set us up for success in the second half, where the majority of our sales and profit are delivered. 


Group includes the net operating costs for our Group offices and shared services, pan-Partnership initiatives and transformation programmes, our JLP Ventures operations, and certain pension operating costs. Overall net costs (before exceptional items) increased by £11.2m to £25.6m, largely due to the increase in pension operating costs.

Investment in the future

Capital investment in the first half of the year was £171.2m, a decrease of £29.3m (14.6%) on the previous year. This includes £22.1m for the acquisition of the freehold for one of our trading branches, and excluding this, our operating capital investment was £149.1m, a decrease of £51.4m (25.6%). We expect our full year operating capital investment to also remain below the previous year's spend. 

Investment in Waitrose was £61.1m, down £13.3m (17.9%) on the previous year, and in John Lewis investment was £78.1m, down £37.6m (32.5%). Our investment continues to be focussed in IT and distribution, which now represents 62% of our operating capital investment, up from 55% last year. 


The pension operating cost was £107.5m, an increase of £11.1m or 11.5% on the prior year costs, reflecting the substantial decline in the real discount rate used to determine the cost to -0.50% at the beginning of the year from 0.70% at the beginning of the previous year, partly offset by the impact of our move to a hybrid defined benefit and defined contribution pension scheme in April last year. Pension finance costs were £12.9m, a decrease of £1.9m or 12.8% on the prior year, reflecting a reduction in the nominal discount rate used to determine the finance cost at the beginning of the year from the beginning of the previous year. As a result, total pension costs were £120.4m, an increase of £9.2m or 8.3% on the prior year. We expect that our full year total pension costs will be approximately £25m higher than the previous year.

Following the conclusion of the triennial actuarial valuation of our defined benefit pension scheme at 31 March 2016, we agreed the ongoing contribution rate for the defined benefit pension of 10.4% of members' gross taxable pay, down from 16.4%, and put in place a plan to eliminate the deficit of £479m over a 10 year period. As a result, in the first half of the year, we made deficit reduction contributions of £83.7m, and our total cash contributions to the pension scheme totalled £138.9m, a decrease of £0.4m or 0.3% on the previous year. At 29 July 2017, the estimated actuarial pension deficit has reduced to £290m.

The total accounting pension deficit at 29 July 2017 was £1,042.3m, an increase of £28.6m (2.8%) since 28 January 2017. Net of deferred tax, the deficit was £881.3m, an increase of £23.8m (2.8%). Pension fund assets increased by £237.4m (4.7%) to £5,282.7m, while the accounting valuation of pension fund liabilities increased by £266.0m (4.4%) to £6,325.0m.


At 29 July 2017, net debt was £421.2m, £128.1m (23.3%) lower than 30 July 2016, reflecting our focus on cash generation and the reduction in capital investment. Net debt is £170.6m (68.1%) higher than January 2017, as expected due to seasonality of our cash flows.

Net finance costs on borrowings and investments decreased by £0.9m (3.1%) to £28.3m. After including the financing elements of pensions and long service leave and non-cash fair value adjustments, net finance costs decreased by £14.4m (25.4%) to £42.4m.


We are clear about our responsibilities as a retailer and have made significant progress across our broad strategic aims: to be the happiest, healthiest retailer; to enhance community wellbeing; to source and sell with integrity; and to deliver more with less.

Waitrose made advances in its aim for all own brand packaging to be widely recyclable, reusable or home compostable by 2025. We also donated £500,000 from the carrier bag fund to the Marine Conservation Society to support beach and river clean ups during 2017 and 2018, in addition to our ongoing support for the UK Dementia Research Institute.

John Lewis continued to demonstrate leadership on the Human Rights agenda. In August, we released the names and addresses of the factories where all our own brand clothing, accessories, footwear and homeware products are made in support of better transparency in the retail sector as part of the Clean Clothes Campaign. Further to that, as part of an ambitious circular economy strategy, through the Furniture Reuse Network, John Lewis also collected and re-used over 1,000 sofas. We also trialled a responsible recycling scheme for used laptops, mobile phones, tablets and PCs, collaborating with the British Heart Foundation as part of a wider EU initiative to address critical raw material recycling.

Notes to editors

The John Lewis Partnership - operates 48 John Lewis shops across the UK,, 353 Waitrose shops, and business to business contracts in the UK and abroad. The business has annual gross sales of over £11bn. It is the UK's largest example of an employee-owned business where all 84,000 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 58 countries worldwide and has eight shops which operate under licence in the Middle East. Waitrose's omnichannel business includes the online grocery service,, as well as specialist online shops including for wine and for plants and flowers.

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 - John Lewis operates 48 John Lewis shops across the UK (34 department stores, 12 John Lewis at home and shops at St Pancras International and Heathrow Terminal 2) as well as John Lewis,  'Best In-Store Experience 2017', 'Best Furniture Retailer 2017,' 'Best Homewares Retailer 2017'1, stocks around 350,000 separate lines in its department stores and across fashion, home and technology. is consistently ranked one of the top online shopping destinations in the UK.  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.

1Verdict Consumer Satisfaction Awards 2017

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For further information please contact:

John Lewis Partnership

Simon Fowler
Director of Communications
Telephone: 07710 398460

Sarah Henderson
Group Senior External Communications Manager
Telephone: 07764 676036 

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John Lewis

Gillian Taylor
Head of External Communications
Telephone: 07919 057931

Katie Robson
Senior External Communications Manager
Telephone: 07764 675608


Christine Watts
Communications Director
Telephone: 07764 676414

Graeme Buck
Head of Communications
Telephone: 07703 379561

Debt investors

Alan Drew
Group Head of Treasury & Corporate Finance
Telephone: 07525 582955

Lynn Lochhead
Deputy Head of Treasury
Telephone: 07834 770684