Innovation and investment take toll on JLP annual profits

John Lewis Partnership “upped the pace of innovation and investment” in the year to January 28 2012 – but that came at the price of some short-term profit the company revealed today as it announced its annual results.

Innovation and investment take toll on JLP annual profits

Gross sales at the partnership – which includes John Lewis department stores and Waitrose – rose 6.4% to £8.73bn, but profit before partnership bonus (14% of salary) and tax was down 3.8% to £353.8m. Group operating profit fell 8.7% to £393.3m.

At John Lewis gross sales were up 3.0% to £3.33bn and like-for-like sales put on 1.3% (down 0.6% excluding VAT), while sales rose 26.3% to £680.8m. Home, Fashion and Electrical & Home Technology all improved on the previous year’s figures. Operating profit at John Lewis, however, slumped 20.4% to £157.9m.

During the year, two new John Lewis at Home shops opened, in Chester and Tamworth, and John Lewis Stratford City opened in September. In addition, the Click & Collect service – which has become John Lewis’ fastest-growing fulfilment route – is now available in all John Lewis shops and 94 Waitrose supermarkets.

Waitrose saw gross sales rise 8.6% to £5.40bn but operating profit was down 5.2% to £260.6m. Both Waitrose and John Lewis traded ahead of their respective markets, increasing their market share.

Commenting on the results, JLP chairman Charlie Mayfield said: “We have achieved a good sales performance in a tough year for the economy. Profits are lower than last year, but better than expected.

“Profound changes are taking place in the retail sector and importantly this was a year when we upped the pace of innovation and investment. That came at the price of some short-term profit but leaves us in a good place at the start of this year.”

He said that customers now wanted more convenience from shops and online and that the partnership had opened more shops in a single year than ever before.

“Simultaneously we made it easier to shop across Waitrose and John Lewis – Click & Collect has been a huge hit with customers. Over a fifth of all sales in John Lewis are now online.”

Five weeks into the 2012/13 financial year, partnership sales excluding VAT are 7.7% higher than last year – up 5.2% at John Lewis and 8.9% at Waitrose.

“Current trading conditions are still difficult and consumer confidence remains subdued,” Mayfield went on. “Despite that, we are continuing to grow faster than the market. We are prepared and have shown that we can trade well through these conditions. The Queen’s Diamond Jubilee and the London 2012 Olympic and Paralympic Games will provide a lift for consumers and I am cautiously optimistic that trading conditions may improve later this year.”

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