The John Lewis Partnership has had a torrid day, following an announcement it will push its turnaround plan back by two years.
It’s the latest bit of bad news that has seen it fall further behind rival Marks and Spencer, whose high street revival recently raised its profit outlook after pivoting towards clothing and homeware.
But, to anyone whose been paying attention, the John Lewis news today shouldn’t be much of a surprise.
At its highly anticipated half-year results, the struggling retailer, which owns grocery store Waitrose and the namesake department store, said losses before tax and exceptional items fell from £66.8m to £54.5m when compared to the same period last year.
While this signalled signs of improvement, the company said that John Lewis sales were down two per cent to £2.1bn as it was hindered by shoppers putting off buying “big ticket items” such as TVs.
In recent months, the employee owned company has been pulling out all the stops to shore up extra funds as economic headwinds and changing shopping habits sent its profits sinking – including axing its staff bonus.
The health of the company has been further questioned, when last week, it warned of job losses at Waitrose for night shift workers in efforts to streamline costs and boost productivity.
It’s also been embroiled in a public battle with Ealing locals for its attempts to build hundreds of rental homes in two block towers within the London borough as part of its push to diversify from retail.
All-in-all, confidence in John Lewis is low, and this has posed a threat to the company’s target for 40 per cent of group profits to come from non-retail ventures by 2030.
“Profits have been struggling at John Lewis for a number of years amid high costs relating to its vast store estate and the rise in cheaper e-commerce rivals like Amazon,” Victoria Scholar, head of investment, interactive investor said.
“Waitrose has struggled as customers become increasingly price sensitive amid the elevated inflation, rising interest rate environment, as well as stiff competition from cheaper rivals like Aldi and Lidl,” she added.
The Partnership’s turnaround plan pales by comparison to the likes of rival Marks and Spencer which has quickly rebounded to become the new darling of the high street.
It also announced it would make a return to the FTSE 100.
The high street favourite has dodged cost of living headwinds by revamping its clothing and homeware line – which aims to appeal to a more modern and trendy customer base – with sales in this division rising six per cent in the first 19 weeks of the year.
Jonathan De Mello, founder of JDM Retail, told City A.M that John Lewis really needs to “focus on getting the retailing basics right first” – like Marks and Spencer has achieved.
He said: “It may have taken M&S some time to turn their business round, but their re-entry to the FTSE 100 highlights the positive progress they have made over the past few years. John Lewis, on the other hand, appear to be moving backwards.
“Clear focus on retail and only retail – and in particular Waitrose, which has been a bit of a millstone round their necks of late – is urgently needed.”
Just last month, Marks and Spencer raised its profit outlook for the year after the high street stalwart was boosted by sales in its clothing and food arm.