John Lewis achieved a 2% increase in gross sales to £11.6bn during in the 52 weeks to 27 January, but profits before partnership bonus, tax and exceptional items dropped by 21.9% to £289.2m, which it said was largely due to pricing pressure at supermarket Waitrose. Fashion, however, had a strong year buoyed by new own brand initiatives.
An adverse movement in exceptional items of £282.5m led to profit before partnership bonus and tax reducing even further by 67.2%. While last year the partnership benefited from an exceptional income, this year there was an exceptional charge of £111.3m, mainly for restructuring and redundancy costs of £72.8m, and for Waitrose branch impairments of £38.9m.
The high end supermarket increased its sales by 1.8% to £6.75bn but its profits were down 32.1% driven by driven by the weaker exchange rate and the store’s “commitment to competitive pricing”. However department store John Lewis had a better year with a 2.2% increase in gross sales to £4.84bn and a 4.5% increase in operating profits before exceptional items to £254.2m.
John Lewis said it had increased its market share across Fashion, Home and Electricals & Home Technology (EHT) during the year. Fashion sales were up 3.2%, boosted by a particularly strong performance in womenswear, up 5%, and especially buoyed by its own brand womenswear, up 14.9%.
During the year John Lewis launched its first in-house denim lifestyle brand for women – AND/OR in March 2017 – and built on the success of its luxury own label, modern rarity, including a collaboration with Eudon Choi. The business has said moving forward its ambition is for 50% of its brands to be own label or exclusive.
An additional investment to extend its premium brand offer in beauty contributed to beauty sales increasing 8.8%, while home sales were down 0.8% and EHT up by 2.6% with connected home and wearable tech being key themes.
Trading at John Lewis had been negatively impacted in the first five weeks of the new financial year due to the heavy snow affecting much of the country, with gross sales down 2.8%, and chairman Sir Charlie Mayfield cautioned that 2018 was set to be another challenging year.
“We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity. We therefore anticipate further pressure on profits. However, the Partnership will see benefits this year from the many changes we implemented in 2017/18, and the faster delivery of key innovations. Together these will strengthen our competitive position in 2018,” he said.