Unaudited results for half year ended 27 July 2019

Thursday 12 September 2019


Financial overview



Gross sales 5,420.2 5,486.6 (1.2)
(Loss)/Profit before PB, tax, exceptional items and IFRS 16  (25.9) 0.8 n/m
Total net debts 2,389.8 2,859.0 (16.4)
Revenue 4,788.0  4,856.7 (1.4)
Profit before tax  191.5 6.0 n/m

Throughout this document, alternative performance measures related to profit for 2019/20 are presented before IFRS 16 adjustments related to depreciation expenses on right-of-use assets and, where relevant, interest charges on lease liabilities, and before the removal of operating lease rental expenses. This is to provide a more meaningful comparison to 2018/19. In addition in 2018/19 a charge of £0.4m has been reclassified from exceptional items to non-exceptional operating expenses. A glossary of financial and non-financial terms is included on pages 8 - 10 of this document.

Sir Charlie Mayfield, Partner and Chairman of the John Lewis Partnership, commented: 
“The re-drawing of the UK retail landscape continues apace. While trading conditions have continued to be difficult, we have accelerated our differentiation strategy and significantly strengthened our balance sheet. The Partnership made a loss before Partnership Bonus, tax, exceptionals and IFRS 16 of £(25.9)m, down £26.7m. Within that, operating profit before exceptionals and IFRS 16 improved in Waitrose & Partners by £14.1m to £110.1m, largely due to property profits this year, but we also saw an improvement in gross margins and a strong operational performance. In John Lewis & Partners, operating losses before exceptionals and IFRS 16 increased by £42.5m to £(61.8)m, reflecting lower sales in categories with more considered purchasing, cost inflation (including non-management Partner pay) well ahead of the level of sales growth and higher IT costs. Our Profit before tax, which includes exceptional income and the charge from adopting IFRS 16 (further details on page 5) was £191.5m, up £185.5m.

We have continued to strengthen our balance sheet position. Total net debts have reduced by £469.2m compared to July 2018. This is due to strong cash generation and tight cash management as well as the decision to close our final salary defined benefit pension scheme. The latter is also the main contributor to our exceptional income. Our accounting pension deficit (post tax) has reduced to £62.8m (July 2018: £171.3m, January 2019: £404.7m) and our triennial actuarial valuation as at 31 March 2019 is currently underway. We have also maintained a strong liquidity position at £1,153m at July 2019, our highest liquidity position at this time of year for more than 10 years and up £116m compared to last year. This is lower than January 2019 due to the cyclicality of cash in our business through the year and because we repaid a £275m bond in April 2019.

As we continue with our strategy to compete through differentiation, not scale, we have maintained investment in Partners and innovation, despite profit pressures, and have seen encouraging results in several areas. In John Lewis & Partners we have seen strong sales growth in Fashion and Beauty and have grown market share significantly as customers responded to our investment in own-brand redesign, new brands, advisory services and personalised shopping experiences. In Waitrose & Partners, despite a weak grocery market, we had a good trading performance with only a marginal decline in like-for-like sales, and continued improvement in gross margins, benefiting from 47 completed category reviews. We also saw strong online grocery sales growth of 10.7%, well ahead of the market. In addition, our focus on innovation in areas that matter to our customers and us, was demonstrated by our successful trial of Waitrose Unpacked, which provides customers with new ways of shopping whilst supporting waste reduction.

Partners play an important role in our differentiation strategy and empowering them so that they are able to create more value for our business is a priority. We continue to invest in non-management Partner pay, well ahead of the level of sales growth. Our average hourly rate of pay for non-management Partners at £9.59, is up 4.7% from January 2019 and is 16.8% above the National Living Wage. In addition, the first half year also saw the greatest single investment we have made in leadership development reaching more than 7,500 people managers. In Waitrose & Partners, we launched the School of Food with 2,000 Partners having attended and a further 2,000 will do so in the second half. In a similar vein we are developing our first John Lewis Service Academy.

We have historically made the majority of our profits in the second half of the year. Although we expect retail conditions to remain challenging, we are pressing on with key areas of innovation such as Waitrose Unpacked and the renewal of key ranges in areas like Menswear and Home. Over the next 12 months, we will also accelerate our transformation of the Partnership to deliver innovation faster and increase emphasis on the competitive difference of Partners.

However, should the UK leave the EU without a deal, we expect the effect to be significant and it will not be possible to mitigate that impact. In readiness, we have ensured our financial resilience and taken steps to increase our foreign currency hedging, to build stock where that is sensible, and to improve customs readiness. However, Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period.

After an thorough process, I was delighted to announce in June that Sharon White will be the sixth Chairman of the John Lewis Partnership. She is an inspirational leader with the skills to take the Partnership forward and will take up her position in early 2020.”


The structural changes in retail remain a challenge and an opportunity. Excess capacity of physical space coupled with subdued consumer confidence are adding to sales and margin pressure. In addition, a number of key operational costs continue to grow ahead of inflation. Our response is to build brands which remain consistently appealing to our customers so that we create more differentiated, valuable and long-term relationships with them. We continue to innovate in the products and services that we offer. Alongside this we are challenging and empowering Partners to seize opportunities to create significantly more value for our business.

Differentiation on products
In John Lewis & Partners, we saw our strongest sales growth in areas in which we have made the greatest investment. We launched our second season of own-brand Womenswear following the full redesign of our range last year; own-brand Womenswear sales have grown 5.7%. In Beauty, we also outperformed the market by 8.6%. In Home, we are redesigning every part of our range and have started with the relaunch of Upholstery. Having grown the size of our Home design team by 50% over the last 18 months, we will launch 3,000 new own-brand products this autumn. In addition, this month sees the relaunch of own-brand Menswear and the launch of our first ever own-brand Gift Food.

In Waitrose & Partners, we have completed 47 category reviews, with strong improvements in profitability and availability across these categories. We also launched our largest ever summer food range - Scrumptious Summer, which consisted of 200 products. Demonstrating our commitment to reducing waste, we trialled Waitrose Unpacked. Following a positive response from customers, we are extending the trial and introducing elements of it into three more shops. Looking ahead, we will complete our category reviews and will relaunch Waitrose 1 with 150 new product lines.

Investment in service excellence
We made additional service enhancements and have seen improvements in customer satisfaction ratings in Waitrose & Partners whilst customer experience ratings in John Lewis & Partners have remained high. To improve the speed and convenience of online shopping, John Lewis & Partners’ customers can now return purchases to Waitrose & Partners delivery drivers at the same time as they receive their groceries. Our Click & Collect service is loved by our customers, giving us confidence to explore this area further. As such, we have trialled the service in six Co-ops and eight Booths shops. We will extend these trials further to 50 Co-op shops before the end of October. In Waitrose & Partners, we have plans to further strengthen our online capabilities this year with our new customer fulfilment centre in Enfield, as we build towards trebling the size of our online grocery operation to a £1bn business over the next three years. In mid-May, we announced a proposal to explore opportunities around automated online fulfilment with Today Development Partners (TDP). We have recently decided not to continue with that relationship and will instead pursue our online ambitions utilising existing expertise across the Partnership. 

We continued to roll out several advisory services including the trial of our Beauty Studio and rollout of personal styling experiences in John Lewis & Partners, which saw women's personal styling sales increase 34%. Building on this, we will launch a new men’s personal styling experience at our Oxford Street flagship store this autumn. Our ambition to create a truly differentiated business in home improvement was supported by the expansion of Home Solutions and its integration with Opun. In October we will launch our first World of Design in our Peterborough shop, bringing together our Home Stylist expertise in one new dedicated space at the heart of our Home departments. We will also explore how shops can become ever more meaningful in our customers’ lives as Partner-led services and immersive experiences from both our brands will take centre stage on every floor in a new concept in Southampton from November onwards. In Waitrose & Partners, we are trialling a new deli proposition in 10 branches which offers antipasti, unique charcuterie and cured meats.

Investment in Partners
We invested significantly in leadership development, with more than 7,500 people managers across the Partnership attending a series of one day “Empowered Leadership” events in May to support our service ambitions. This marked the start of a broader programme of training for people managers. In Waitrose & Partners, we are building the passion and expertise of our Partners through the Waitrose School of Food and in John Lewis & Partners we are developing our first John Lewis Service Academy, equipping customer-facing Partners with what we believe to be the future skills of retail.

We are also expanding our apprenticeship programme, introducing new apprenticeships including Butchery, Fishmonger, Chef Specialisms, Customer Service, Vehicle maintenance and repair, and three senior leadership schemes. Among the apprentices that have completed their programmes in this half year, 83% passed with distinction where that was an achievable grade.

In line with our strategy, we continue to transform our organisation and in the year ahead we will accelerate our move towards ‘one Partnership’, obsessed with our customers. We have also made a number of divestments of shops and assets in the first half of the year.

Transforming sharing of knowledge and power
Alongside organisational change we are also focused on transforming our sharing of knowledge and power. In April, the Partnership Council, which is a body of democratically elected representatives that represent the views of Partners across the business, voted in support of changes to the Constitution which will ensure that the way in which power is shared across the business is fit for purpose in the future. These changes included the appointment of two new independent directors and a new enhanced role for President of Partnership Council.

In May the Partnership Council also unanimously agreed changes to our pension scheme. This concluded a year-long review and consultation with Partners. Our non-contributory final salary defined benefit section of our pension scheme will therefore close to future accrual next year and will be replaced by a defined contribution pension offer that is market-leading in retail.


Our Partnership loss before PB, tax, exceptionals and IFRS 16 was £(25.9)m compared to £0.8m profit last year. The decline was principally due to the increase in operating losses before exceptionals and IFRS 16 in John Lewis & Partners, down £42.5m to £(61.8)m which was driven by:

  • the impact of subdued consumer confidence. This was mainly on sales, particularly in Home and Electricals where demand for more considered purchases has remained depressed, but also in increased marketing costs as we responded to soft consumer demand;
  • additional IT costs. We have steadily increased IT investment over the last few years to set ourselves up for the future. A number of significant new systems have become operational through the course of last year resulting in incremental maintenance, support and depreciation costs this year; and
  • cost inflation well ahead of the level of sales growth, including the investment in non-management Partner pay.

Waitrose & Partners grew operating profits before exceptionals and IFRS 16 by £14.1m to £110.1m, with the increase largely due to property profits of £12.1m this year. Excluding this, profits were still ahead of last year with an improvement in gross margins and a strong operational performance offsetting the investment in non-management Partner pay and higher marketing costs.

This year we have adopted IFRS 16, the new accounting standard for leases, using the modified retrospective approach on transition. Our last year results are therefore not restated. Whilst IFRS 16 has decreased our reported Profit before tax by £26.5m for the half year, due to the length of our lease portfolio, it does not change the underlying economics of our business and it has no quantitative impact to cash flows. Further details of the impact of IFRS 16 are included on pages 15 to 17.

After including exceptional income of £243.9m (2018/19: £5.2m) and the charge from adopting IFRS 16, our Profit before tax was £191.5m, up £185.5m on last year. Exceptional items this half year mainly include income of £249.0m following the approved changes to our pension offer, which removed the future link with final salary on defined benefit pensions and instead increases future pensions up to retirement in line with inflation. In addition there was income of £20.9m from the reversal of previous branch impairments, income of £10.0m from a legal settlement and charges of £37.5m for strategic restructuring and redundancy costs. Further details of exceptional items are included on page 6.

We remain focused on maintaining a strong and flexible balance sheet. We have reduced our total net debts by £469.2m compared to July 2018 and one of our key priorities remains to reduce our Debt Ratio to around three times cash flow within four years.

In addition we have built up and maintained a strong liquidity position (£1,153m at July 2019), despite repaying our £275m bond in April 2019 and despite cash being at a cyclical intra-year low point. Our strong liquidity ensures we have adequate reserves as a defence against economic uncertainty and also enables us to maintain strong levels of investment in the business. Capital investment forms the major part of our business investment and at £127.8m it was slightly lower than last half year’s £141.4m. We have also invested significantly in products and services, in leadership training, in change costs associated with restructuring and transformation of the business, and a greater proportion of our IT investment is revenue investment.


  Waitrose & Partners John Lewis & Partners
2019/20 2018/19 Change 2019/20 2018/19 Change
£m £m % £m £m %
Gross sales 3,365.4 3,393.2 (0.8)% 2,054.8 2,093.4 (1.8)%
LFL sales (0.4)%   (2.3)%  
Revenue 3,170.8 3,193.4 (0.7)% 1,617.2 1,663.3 (2.8)%
Operating profit/(loss) before exceptional items and IRFS 16 110.1 96.0 14.7% (61.8) (19.3) (220.2)%
Operating profit/(loss) 100.8 94.4 6.8% (34.9) (33.5) (4.2)%

Note: Waitrose & Partners like-for-like sales excludes fuel 

Exceptional items
Exceptional income totalled £243.9m (2018/19: £5.2m) with £23.1m charge in Waitrose & Partners (2018/19: £1.6m), £13.7m income in John Lewis & Partners (2018/19: charge of £14.2m) and £253.3m income in Group (2018/19: £21.0m). Further detail is included in the following table:

Strategic restructuring and redundancy programmes (37.5) (8.2)
Branch impairments 20.9 (12.6)
John Lewis & Partners supply chain 1.5 -
Pay provision - 26.0
Defined benefit pension closure 249.0 -
Legal settlement 10.0 -
  243.9 5.2

Further details explaining each of the exceptional items is included within Note 4 below.

In 2018/19 there was a charge of £0.4m for head office restructuring and redundancies in Waitrose & Partners, which was previously reflected as exceptional items and has subsequently been reclassified to non-exceptional operating expenses.

Net finance costs
Net finance costs increased by £56.2m to £88.1m, principally due to the interest charge on outstanding lease liabilities following the adoption of IFRS 16 this year. Excluding the impact of IFRS 16, net finance costs increased £4.3m to £36.2m. This increase is principally driven by higher long leave finance costs arising from volatility in the market driven assumptions, which has been partly offset by reduced interest costs on borrowings, following the repayment of financial debt, an increase in returns from short-term investments and reduced pension finance costs due to a lower accounting pension deficit at the beginning of the year compared to the beginning of the previous year.


About the John Lewis Partnership

The John Lewis Partnership owns and operates two of Britain's best-loved retail brands - John Lewis & Partners and Waitrose & Partners. Started as a radical idea nearly a century ago, the Partnership is now the largest employee-owned business in the UK, with 81,500 employees who are all Partners in the business and share in its profits. The Partnership operates on strong democratic principles, which means that every Partner has a say in how the organisation is run. The business has annual gross sales of over £11.7bn, 394 shops and a leading online business. Its commercial strategy is focused on differentiation rather than scale, through investment in innovation and Partner led service.

About John Lewis & Partners

John Lewis & Partners operates 50 John Lewis shops across the UK (37 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 & Partners won, 'Best Multichannel Retailer 2018', 'Best Clothing Retailer 2018', and 'Best Furniture Retailer 2018' at the GlobalData Customer Satisfaction Awards 2018.  John Lewis Finance offers a range of comprehensive financial services products - including Insurance, Foreign Currency, International Payments and the Partnership Card - delivering the values of expertise, trust and customer service expected from the John Lewis brand. johnlewisfinance.com

*GlobalData Retail Customer Satisfaction Awards 2018

About Waitrose & Partners

Waitrose & Partners has 344 shops in England, Scotland, Wales and the Channel Islands, including 61 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 & Partners is an employee-owned business - all employees are Partners and have a say in how the business is run. Waitrose & Partners exports products to more than 50 countries worldwide and has nine shops which operate under licence in the Middle East. The retailer's omnichannel business includes the online grocery service, Waitrose.com, as well as specialist online shops including waitrosecellar.com for wine and waitroseflorist.com for plants and flowers.


John Lewis Partnership

Clayton Hirst
Partner & Group Head of Corporate Affairs
Tel: 07947 708167

Sarah Henderson
Partner & Group Senior External Communications Manager
Tel: 07764 693023

Citigate Dewe Rogerson

Simon Rigby

Joint Managing Director
Tel: 07771 784446

Jos Bieneman
Tel: 07834 336650

Ellen Wilton
Associate Director
Tel: 07921 352851

John Lewis & Partners

Gillian Taylor
Partner & Head of Communications
Tel: 07919 057931

Waitrose & Partners

Graeme Buck
Partner & Head of Communications
Tel: 07703 379561

Gill Smith
Partner & Senior Corporate PR Manager
Tel: 07887 898133

Debt Investors

Lynn Lochhead
Partner & Head of Treasury & Corporate Finance
Tel: 07834 770684