The UK high street was dealt another blow yesterday as one of the country’s biggest household names posted a sharp drop in profits.
Profits at the John Lewis Partnership – which comprises John Lewis and Waitrose – fell 77 per cent to £103.9m in 2017, forcing the retailer to cut its staff bonus to its lowest level for 60 years. Sales edged up 1.8 per cent to £10.2bn.
Meanwhile, figures released today by accountancy firm BDO show that in-store sales fell 1.6 per cent on a like-for-like basis in February. Sales of lifestyle, fashion and homeware products dropped by 0.6 per cent, 3.4 per cent and 4.2 per cent respectively, as consumers increasingly choose to shop online.
Laith Khalaf, equity analyst at Hargreaves Lansdown, warned: “If John Lewis is struggling, this tells us how much trouble some of the weaker players are in.”
Patrick O’Brien, research director at GlobalData, said John Lewis’ figures showed how difficult non-food retailing had become.
“Even for retailers as strong as John Lewis, which is managing some top-line growth to maintain market share, obviously the difficulty is maintaining profitability,” he said.
Two major retailers, Maplin and Toys R Us, fell into administration last week, putting more than 5,000 retail jobs in doubt. While the stores of both chains continue to trade, Maplin’s administrators PwC yesterday said they had not found a buyer for the business and would have to start laying off staff.
Earlier this week, New Look announced a proposal to close a large number of stores, likely leading to around 1,000 job losses. The fashion chain must secure creditor approval for the plans, which will also allow it to reduce its debt burden, in a vote later this month.
Voicing his concerns about the woes of retailers, Marks and Spencer chief executive Steve Rowe said yesterday that the firm was in a “terrible place”.
Speaking at Retail Week Live conference, Rowe – who has been at M&S since 1989 – said the business had been losing customers for at least eight years, the BBC reported.
Also yesterday, Bargain Booze owner Conviviality’s shares plummeted nearly 60 per cent to 123p as the company warned its earnings this year will be below market expectations.
However, Khalaf said there were bright spots in the UK’s retail sector and that online-only retailers and discount chains were well-placed to navigate a slowdown in consumer spending.
Research released earlier this week by professional services company RPC found sales at the UK’s 20 biggest online-only retailers have jumped by almost a quarter in the last year, hitting £8.4bn in 2016/17.
“There are certain consumers who are not driven to online, and they are more towards the discount market,” Khalaf added.
“But if you are a big broad high street retailer then you need an online offering.”
Meanwhile, perfume retailer The Fragrance Shop is understood to be mulling a £200m stock market listing this year.