Retail Viewpoint – John Lewis
A slowdown in H1 sales from the high street bellwether is a sure sign that consumers are feeling the pinch. John Lewis’ total revenue for the period increased by 2.4% on last year to £1.65bn, propped up by the online channel rising 10.7% and accounting for 37.4% of sales, concealing the disappointing UK store sales – slumping 2.0% on the previous year. Operating profit before exceptional items improved, up against heavy investment in the supply chain in 2016/17, rising 39.7% and bringing operating margin to 3.1% vs 2.0% last year.
As the mid-market stalwarts struggle to convince shoppers to part with their cash and continue to report dismal sales, John Lewis has fared slightly better owing to its strong service proposition, trusted reputation and improved product ranges. Next, which announced poor interim results today does not have the same strengths to fall back on and reported store sales down 8.3% as the online channel could not salvage total revenue which fell by 2.2% against last year.
With the retail landscape anticipated to remain bleak for the next two years and minimal growth expected from physical channels, John Lewis has wisely branched out into areas where consumers are more willing to spend, namely services. Offering its one year guarantee on its extended trial of home improvement services will encourage loyal customers to buy more than just products and will ensure there is opportunity for the retailer to achieve growth at a time when the retail market is confined.
Fashion was the standout performer with sales lifting 3.5% on last year, helped by womenswear sales up 5.8%, aided by the introduction of new own label ranges including AND/OR and Modern Rarity and the revitalisation of its branded offer. As online pureplays like Amazon and ASOS continue to muscle in, stocking a wide range of brands, it is vital for John Lewis to frequently review its proposition ensuring the range includes exciting and relevant products. Its strategy to drive the proportion of exclusive products to 50% will ensure it has a point of difference and will continue to set it apart from its competitors.
Source: GlobalData, 14th September 2017