THE CHAIRMAN of John Lewis has predicted a modest recovery for retailers this year despite unveiling a sharp fall in annual profits.
Charlie Mayfield told City A.M. the sector would shift from “decline to growth” this year following a “bloody difficult” 2011.
He added: “I’m not in any way underplaying how serious the challenges are. The macro-economic environment is still severe but it is less critical than it was.”
The John Lewis Partnership, the employee-owned co-operative that owns 25 John Lewis shops and 272 Waitrose supermarkets, said it grew total sales excluding VAT by 5.4 per cent in the year to the end of January.
That means the group did significantly better than the retail sector overall which grew total sales by just two per cent – less than half the amount – over the same period, according to the British Retail Consortium (BRC).
But operating profit tumbled by 8.7 per cent to £353.8m, after the group decided to press ahead with its biggest ever store expansion programme, which saw it open 29 new Waitrose shops and three John Lewis outlets.
The 80,000 or so partners who own the business shared a bonus of £165.2m, equivalent to 14 per cent of their salary or seven weeks’ pay, less than the 18 per cent they pocketed in 2010.
Waitrose performed more strongly than the department stores, with sales at shops open for more than a year growing by three per cent excluding VAT. Overall sales, which include new openings, jumped by 7.9 per cent to £5.07bn, while operating profit fell by 5.2 per cent to £260.06m.
By comparison John Lewis department stores struggled like most non-food high street retailers. Excluding VAT, sales at stores open for more than a year dipped by 0.6 per cent. Overall sales, which include new openings like Westfield Stratford, were up three per cent to £3.33bn, while operating profit fell sharply by 20 per cent to £157.9m.
Mayfield added: “This was a year when we upped the pace of innovation and investment. That came at the price of some short-term profit but leaves us in a good place at the start of this year.”