A rebrand to John Lewis & Partners and Waitrose & Partners to “differentiate” and highlight the brand’s purpose has failed to translate into profits, which have plunged 45.4%
The group rebranded all of its stores and marketing collateral last September and cemented the shift with a lavish advertising campaign from Adam&Eve/DDB. This was shortly followed by its £7m Elton-John themed Christmas activity.
However, updating on its financial performance for the year ending 26 January, it revealed profits at the group had fallen over 45% to £160m.
At Waitrose, operating profits rose 18% to £203.2m.
But the group’s performance was dragged down by weak home furnishing sales, higher IT costs and new store openings within John Lewis, where profits slid 56% to £114.7m.
As a result, it has cut its staff bonus to the lowest level in 66 years, with its 83,900 “partners” set to receive a bump of equivalent to just 3% of their annual pay.
The company also said it was selling a further five unprofitable Waitrose shops to other retailers, with the loss of 440 jobs
“The market context continues to be challenging. That’s evident in our results, especially in John Lewis & Partners, where we saw near-constant discounting across many categories from October onwards in response to the combination of subdued demand, excess retail space and some other retailers’ distress,” explained chairman Sir Charlie Mayfield.
“We expect 2019 trading conditions to remain challenging but are confident in our strategic direction and customer offer across both brands.”
Anusha Couttigane, retail analyst at Kantar Consulting, said the results – the worst in 60 years – come as little surprise after a profit warning last year.
“But it does expose the vulnerability of British retailers as we hurtle towards Brexit; executives at JLP cited weaker sales, higher property costs and gross margin pressure as key reasons for the decline," Couttigane said. "Tight cash management and net debt reduction also played a role as the company sought to secure its financial position in the context of wider economic pressures.
“Going forward, John Lewis & Partners believes a better assortment, driven by private label, will help it to differentiate from multibrand rivals, while Waitrose & Partners will continue to expand its proposition in health alternatives like vegan options, focusing on a clearer, simplified offer. The group will also continue to clamp down on waste and plastics in own-brand packaging, speaking directly to shoppers motivated by ecological issues.”