The owner of John Lewis and Waitrose has said its turnaround plan will take two years longer than scheduled, after reporting another loss for the first half of the year.
The John Lewis Partnership (JLP) made a pre-tax loss of £59m for the 26 weeks to 29 July, as it continued to face pressures from higher costs and caution from shoppers during the cost of living crisis.
However, the retail group said its performance was improving, and its pre-tax loss was 41% lower than the £99m loss reported for the same period a year earlier.
Despite the challenging economic situation, shoppers continued to spend money on themselves, with sales of clothing, beauty products and “dine-in” meals all rising. However, sales fell for “big ticket” items, such as technology products and sofas.
The company said the economic outlook remained uncertain but it expected to see an improvement in its full-year financial results.
However, JLP said stubbornly high inflation meant it would need an extra two years to deliver the turnaround it calls its “partnership plan” – aimed at offering value to customers, investing in its digital offering and expanding online grocery deliveries.
It said the plan, launched in 2020 with the target of a £400m profit by 2025/26, was now going to take until 2027/28 because of “inflationary pressures”.
Sharon White, the JLP chair, said inflation was not the only reason for the delay: “The scale of investment that we need to modernise the business, not least in areas of technology is, to be frank, greater than we had expected … Those two factors mean the plan will take a couple of years longer to get us back to the sorts of profit levels that we’ll be happy with.”
In the first half of the financial year, operating profit at the John Lewis department store chain fell from £295m to £277m. However, operating profit at the Waitrose supermarket chain improved to £504.4m from nearly £432m, despite IT problems earlier in the year that affected product availability. John Lewis sales fell by 2%, while Waitrose sales increased by 4%.
The results are the first to be released since the partnership’s first chief executive, Nish Kankiwala, a former Hovis and Burger King executive, took up the role in late March.
Kankiwala, who was appointed with the task of turning around the partnership, said: “There are no brands better placed than Waitrose and John Lewis to provide customers with what they need right now – to help them feel good and eat well.”
JLP had been widely expected to remain loss-making in the first half of the year, which has been something of a pattern in recent years, and given the period does not include the crucial Christmas trading window.
The results came after a worse-than-expected £230m loss reported in March – only the partnership’s second-ever full-year loss. At the time, the retail group blamed inflation and soaring costs for freight, energy and labour for its financial difficulties, and told staff that they would not get a bonus this year.
White said the business saw “reasons for optimism”, adding that “performance is improving. More customers are shopping with us.”
She survived a vote of confidence in May, when staff backed her to continue as chair, despite expressing their dismay at the retailer’s poor performance.
The group’s results came just days after White called for a royal commission review into the UK’s ailing high streets, arguing that mass stores closures, crime and antisocial behaviour were blighting Britain’s town centres.
JLP’s finance chief said on Thursday the chain had been hit by a rise in shoplifting. “We have seen an increase in what we call shrinkage, which is mainly theft, by £12m year on year,” Bérangère Michel told reporters after the group reported its first-half results.
The group operates 34 John Lewis shops plus one outlet and 329 Waitrose shops across the UK, so this implies additional losses of about £33,000 a shop.
Victoria Scholar, head of investment at 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: “Focus will be on the all-important festive period when John Lewis typically enjoys a seasonal boost. Dame Sharon White has a daunting task at hand to revive John Lewis’s fortunes at a challenging time for retail more broadly, laid bare by the recent collapse of Wilko.”
