I want to thank you for your commitment and dedication in what has been another tough year. With the pandemic and with so much change within our business, I don’t underestimate the personal impact and I am truly grateful.
As we head into the second year of the Partnership Plan, our five year strategy to transform the business, we’re gaining momentum in the most competitive retail market in history. Our focus on quality, value, sustainability and exceptional service is serving us well.
You may recall that we report our profit using two measures - before and after exceptional items and Bonus. Measuring our profit without these items gives a better indication of our underlying performance. Profit before Bonus, tax and exceptional items - or ‘PBTBE’ - was £181m. This was £50m (38%) higher than 2020/21 and £111m (159%) better than two years ago.
When we include exceptional items (£161m) and Bonus (£46m), our loss before tax was £26m. This was £491m (95%) better than our loss in 2020/21 (when we had a big ‘write down’ in the value of our John Lewis stores) and £172m (118%) lower than the profit two years ago, when we had a one-off benefit from closing our defined benefit pension scheme. Our exceptional costs were mostly restructuring costs, property lease exit costs and a small write down of John Lewis stores.
Waitrose sales were £7.5bn, up 1% like-for-like on last year (down 1% as reported) and up 11% like-for-like on two years ago (up 9% as reported).
John Lewis achieved the highest sales in its history, £4.9bn, which was up 8% like-for-like on last year (4% as reported). Against two years ago, John Lewis sales were up 10% like-for-like (2% as reported).
Reducing costs remains a key priority. We cut costs by £170m, a major factor behind our profit growth compared to last year.
This has involved difficult decisions that have affected Partners deeply: reducing management roles in our shops and reducing our central teams. We have also closed eight John Lewis stores and a delivery hub. These were necessary decisions to ensure the Partnership is sustainable in the future.
In 2020, the Board set the minimum thresholds for paying a Bonus again: a combination of PBTBE of £150m and debt ratio of less than 4x. We achieved both of these targets. Given the positive performance, and the extraordinary contribution of Partners, the Board decided to share a 3% Bonus with Partners; while the Executive team and I are donating our Bonus to the British Red Cross.
With our Partners, like the whole country, facing a cost of living squeeze, we believe that this is the right time to pay the voluntary Real Living Wage, nationwide. In addition, this year’s pay review has been set at 2%, making the total pay investment £54m (excluding Bonus, which adds a further £46m).
We have made a good start to our Partnership Plan but are only one year through our five year transformation. Looking ahead, we see continued uncertainty from global events, affecting the economic environment, our customers, Partners and society. As inflation and energy prices rise, our customers face higher living costs. While this creates uncertainties as we look ahead, we remain focused on investing significantly in our Partnership Plan to transform and grow our business. In 2022/23, this will involve:
- Investing £119m in our John Lewis shops, digital services and our distribution capabilities;
- On top of these investments, we’re committing £500m to give John Lewis customers everyday quality and value, and an improved MyJL loyalty proposition is coming later this year;
- £55m investment to complete a further 23 major refurbishments of Waitrose stores and £72m investment in digital services and distribution;
- Working with our Waitrose suppliers to keep prices as low as possible and offering savings on products that customers buy the most through the revamped MyWaitrose loyalty scheme;
- Accelerating growth in John Lewis Financial Services with a £53m investment;
- Continuing to develop and progress our property rental proposition;
- Targeting further sustainable cost savings by year end as we become more efficient.
This is a year of opportunity for the Partnership, despite economic headwinds. We have come through so much already and our solidarity will continue to carry us through. I am confident that by continuing to invest in our strategy we will deliver for our customers, Partners, suppliers and communities.
PARTNER & CHAIRMAN