John Lewis Partnership reported its first ever half-year loss yesterday, blaming falling sales and rising costs for a gloomy six months.
It’s bad news for incoming chair – and retail rookie – Sharon White, who has a challenge on her hands to turn around the department store’s fortunes.
The issues facing the retail giant aren’t new – profit margins fell 90 per cent in the first half of last year – but they appear to be deepening as the high street struggles to adapt to the internet economy and high property costs.
While some turn to mass discounting to boost sales, few retail-watchers believe White would be wise to pursue that tactic at the beloved brand.
Instead, investing in transforming stores and capturing market share could secure John Lewis’ future.
It’s hardly a surprise that some are questioning the “never knowingly undersold” strategy when profits are plummeting. But a reputation for quality is worth keeping hold of.
Analysts agree. As Richard Hyman notes: “If you’re offering a superior experience and superior product range, consumers aren’t stupid, they know they are likely to have to pay a bit extra for that.”
It is well documented that the retail industry is struggling with issues, including consumer uncertainty, high operating costs and changing customer behaviour. So, rather than playing with prices, first on White’s to-do list should be a review of John Lewis’s costly store portfolio.
Waitrose, owned by the partnership, has closed seven stores this year. However, the department store chain has been less trigger-happy. Indeed, it closed its first store in 12 years in January, hardly the sign of a tight hold on costs at a time when the high street is under pressure.
Despite the challenges facing White on her arrival, being an outsider could play in her favour. White has a civil service background, was a senior economist at the World Bank and sits on the board of Barratt Developments, but is notably lacking in retail sector experience.
On announcing her appointment, current chairman Charlie Mayfield admitted she is “not the conventional retail choice”. However, these are “not conventional retail times,” he said.
Sir Charlie isn’t wrong. A fresh pair of eyes might be exactly what John Lewis needs.