John Lewis Partnership has published its Interim Half Year Results wihich were hit by inflation and changes in customer spending.
The group stated, 'This half year we made a loss before tax and exceptional items of £92m, compared to a profit of £69m in the same period last year and a loss of £52m three years prior (i.e. the last pre-Covid half).
'This is before exceptional items, principally reducing the size of our London office space. Including exceptional items, we made a loss before tax of £99m (loss before tax of £29m in 2021/22 and a profit before tax of £192m in 2019/20, which included the benefit of closing the defined benefit pension scheme).
'It is not unusual for us to make a loss in the first half of the year - we have done so in three of the last four half years. Our trading is heavily skewed to Christmas with most of our profits coming in the last quarter of the year.'
The loss was largely due to two main factors:
> Inflation has affected consumer spending. The group has more customers year-on-year in both brands (up 6% in Waitrose and 4% in John Lewis) but they are spending less. Inflation has increased our costs, which means the firm has to do more to meet our original efficiency targets because we have not passed on all of the increased costs to customers;
> Post-pandemic customer trends. The business has seen in-store spending rebound compared to last year. Online remains elevated compared to pre-pandemic levels; the group believes this shift is permanent. It has seen customers move their discretionary spending from high margin, big ticket household items to restaurants and holidays - from dining room furniture to dining out.
John Lewis sales were £2.1bn, up 3% like-for-like on last year (up 3% in total). Against three years ago, John Lewis sales were up 13% like-for-like (up 4% in total).
This has been driven by a return to shops. The share of sales in shops has averaged 41% for the half year, compared to 26% last half year, during the pandemic, and 60% before Covid. City Centre stores have come back most strongly with the return to more office working.
Waitrose sales were £3.6bn, down 5% like-for-like on a year ago (down 5% in total); up 7% on a like-for-like basis on three years ago (up 4% in total). During the pandemic, Waitrose benefited from bigger baskets as customers were restricted by the pandemic, dining out less and doing fewer shops.
Customer numbers have held up, transactions were up 14% year-on-year, but basket sizes are smaller by nearly a fifth.
Online shopping continues to be important, accounting for 15% of sales; significantly up on before the pandemic and 5% below the pandemic peak of around 20%. Nearly seven in ten baskets include a product from the Essential range. Total customer numbers are 13.4 million, up 6% year-on-year.
Waitrose Trading operating profit fell by £93m to £432m due to a combination of volume decline and inflationary pressures being partially offset by a more favourable profit mix and cost savings.
The group said, 'The outlook is uniquely uncertain. We believe we are well placed to navigate the current inflationary headwinds. First, we have a strong balance sheet, which helps us navigate through trading volatility with total liquidity at £1.5bn (cash of £1.1bn and facilities of £0.4bn).
'Second, the loyalty of our customers and a deep understanding of their changing habits and needs. Third, the dedication of our Partners who provide great service for our customers.
'A successful Christmas is key for the business given the first half. We will need a substantial strengthening of performance, beyond what we usually achieve in the second half, to generate sufficient profit to share a Partnership Bonus with Partners. Much will depend on the wider economic outlook and consumer sentiment.
'For our part, we want to give our customers a memorable and affordable Christmas, with Christmas markets in 13 John Lewis stores and 60 new Waitrose products.'