John Lewis announces growth strategy as it warns on zero first half profit

The John Lewis Partnership has said in a statement that its half year profits before exceptional items to be close to zero this year. For the full year, the company added, there are a wide range of possible outcomes, given the market uncertainty, but it is currently assuming that profits before exceptional items will be substantially lower than last year. The Partnership currently expects to see profit growth in Waitrose, a decline in John Lewis and significant extra costs at the Partnership level as a result of greater IT investment.

Commenting on the announcement, Sir Charlie Mayfield, Chairman of the John Lewis Partnership, said in a statement: “As retail changes we need to tread a path that enables us to thrive as a business while building on the qualities that make us different. The measures that we have outlined today are an important next step in our strategy that will ensure we emerge stronger from this period of profound change.”

John Lewis chalks out strategy for growth

The company further stated that it is widely acknowledged that the retail sector is going through a period of generational change and every retailer’s response will be different and for plans include further investment in and development of unique products and service, together with a greater emphasis on own brand and innovation.

The company announced that it will take steps to strengthen its balance sheet by a further 500 million pounds (660.6 million dollars) over three years to invest in product and service innovation through rebuilding profitability at Waitrose, creating more value from the property estate, and conducting a review of the Partnership’s pension scheme. The company aims to maintain investment at a rate of 400-500 million pounds (530-660 million dollars) a year and level of capital investment as a percentage of sales will be more than 10 percent ahead of typical competitors.

“John Lewis’ statement surrounding their profits and our research serve to highlight a common David versus Goliath theme emerging in the retail industry. As a series of large retailers falter, we are at the same time beginning to witness the rise of the independent retailers. Independents offer a niche product set, a more personalised experience and crucially, can adapt quickly to the changing needs and situations of a consumer. For many larger brands this level of agility is insurmountable, making them look outdated and disconnected, which is leading to closures and collapse that is being reported increasingly,” said Komal Helyer, retail expert at Pure360, commenting on the company's strategy and retail scenario in general.

John Lewis to focus on product development and new services

At John Lewis, the company said, strategy would focus three key areas - unique products, personal service and expanding into new services. Key to this, the company added, is supercharging women’s fashion, acquiring new niche brands, securing exclusives with international brands and significantly growing design capability. Currently 30 percent of John Lewis’s sales are from products that are own-brand and exclusive products and the company now aims to increase this to 50 percent.

The company also plans to expand beyond shops and online into new and enhanced services, with a focus on strengthening its position in the home services market and growing financial services.

As a part of adjustments to its overall estate, including exit or closures, Waitrose has announced the disposal of four convenience shops and one small supermarket.

Picture:John Lewis website

 

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