John Lewis scores in fashion, beats weak market despite challenges

“A solid performance in a difficult market”. That’s what John Lewis Partnership chairman Sir Charlie Mayfield said of the latest interim results from the firm.


John Lewis's And/Or launch proved strong


And we can’t argue with that assessment. While its fashion unit had a good six months, boosted by own brand launches, gross sales including the John Lewis chain and the Waitrose supermarkets (plus their websites) rose only 2.3% to £5.395 billion in the period to July 29. And they rose 2.3% as well as the John Lewis chain itself, reaching just shy of £2.071 billion.

Partnership profit before tax and exceptional items was down 4.6% to £83 million, but this was flattered by property profits and after excluding these it was down 17.2%. It was even worse on the pre-tax group profits format where they fell 53.3%. Meanwhile operating profit was down nearly 40% as the firm invested heavily for future growth. At the John Lewis chain, operating profit dipped just over 10% to £29.1 million.

But at least the second half has started strongly. For the first six weeks of the half, Partnership gross sales were up 2.4% with John Lewis gross sales up an even better 4.5% (or 2.6% on a comparable basis).
INFLATION AND UNCERTAINTY

So why such a weak H1 performance from a company known for turning in some stunning results in the past?

“Inflationary pressures driven by exchange rates and political uncertainty,” Mayfield said. The exchange rate-driven increase in cost prices has put pressure on its margin and it has chosen “to hold back on increasing prices across many areas.”

And he added that those exchange rates and political issues “have dampened customer demand, especially in categories connected to the housing market.”

That’s undeniable as the firm’s weekly sales reports have consistently shown Home product sales to be the weakest link in its operation. But the strongest link has been Fashion and Mayfield said that “our market share gains in Fashion stood out.”

On the upside too, sales growth has continued in the first few weeks of the second half and the company believes it’s “well set” for the all-important seasonal peak, “but we expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year.”

But despite this pressure, the company is obviously well placed to weather any storms. Both of its store chains have seen increased customer numbers and its customer net promoter scores remain strong in both too.

FASHION LAUNCHES

The company has been driving John Lewis Fashion unit sales higher partly by investing in own brands. In H1 it launched its first in-house denim lifestyle brand for women, called And/Or, and its first Spring/Summer collection for Modern Rarity. They “continue to perform comfortably ahead of our expectations and across the total John Lewis product mix, the John Lewis brand is the number one in total sales,” it said.

Fashion sales overall were up 3.5% in H1, gaining market share, with standout performances in Womenswear, up 5.8%, and Beauty, up 10%. And even Home sales managed to remain flat, despite the tough market.

The company said too that John Lewis sales during the Clearance period were particularly strong, up 4.5% compared to last year.


Modern Rarity was another John Lewis bright spot


Online sales represented 37.3% of total merchandise sales, up from 34.5% last year. It maintained its investment across all online channels, with the rollout of mobile-optimised online buying guides and plans to launch digital myJL gift vouchers, available to customers via its app, later this year.
 
It’s also investing in the store experience and large-scale refurbishments are underway in Nottingham and Edinburgh, as well as 43 enhancement projects across its full estate, and its most service-led and experiential shop to date will open in Oxford next month.

And it’s extending the use of technology. Before its peak trading period, it will continue the rollout of Partner hand-held devices across all of its shops, which provide product information, stock enquiries and direct ordering capability. It also said Click & Collect now accounts for over half of all John Lewis online orders.

STORES AS MARKETING VEHICLES

The company said it shops “are an invitation to customers to experience our brand” and as part of its Summer-long National Treasures campaign, its hosted more than 150 customer events in the stores. These included customer styling sessions with Vogue, bespoke afternoon tea in its Wedgwood Tea Room at Peter Jones, and scent and wellbeing workshops.


The National Treasures campaign turned John Lewis stores ino marketing vehicles

The second half year will see acceleration of store-based marketing, with Only Here, its high-impact visual Autumn/Winter John Lewis campaign, having launched on 1 September. It supports the ambition for 50% of its products to be exclusive to John Lewis.

And in H1 it integrated Fashion into its 50,000 sq ft photography and content studio based in Origin Park, London, enabling it to respond faster than ever to the growing customer demand for inspirational, design-led content in its online store.

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