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John Lewis has warned it will take a further two years to complete a turnaround of the department store chain and supermarket Waitrose and to return the group to “sustainable profits”, as it posted a further loss in the first half of the year.
The UK’s largest employee-owned company blamed high inflation and ballooning staff costs for the delay, as it sought to become a simpler and more profitable group. Completion of a five-year revival plan, spearheaded by chair Dame Sharon White, has now been pushed back to 2027/28 from 2025/26.
White had pledged to return the company to an annual profit of £400mn by 2026 when the strategy was first unveiled in 2020. John Lewis said on Thursday that meeting this would be delayed, with White adding that she believed in achieving “sustainable” not maximum profit as it was more aligned with the mutual’s values.
Chief executive Nish Kankiwala added: “It’s going to take longer to deliver the overall outcome, both in terms of the financial outcomes that we laid out in the original plan but also in terms of the investment we wanted to make.”
Finance director Bérangère Michel said the employee-owned group would become profitable ahead of the new deadline, however.
There were some signs of recovery in its latest results. The company posted a loss before tax of £57.3mn in the six months to July 29, a 14 per cent improvement on the £66.8mn loss it recorded during the same period last year.
Total group sales were £5.8bn in the six-month period, up 2 per cent year on year, with Waitrose sales up 4 per cent but those at John Lewis down 2 per cent.
White said: “While change is never easy — and there is a long road ahead — there are reasons for optimism. Performance is improving. More customers are shopping with us.”
The group said it was too soon to determine whether it would pay its famous staff bonus this year and said it was prioritising investment in customer service, new products and overall pay.
The lift in sales at Waitrose was partly driven by price rises, which were up on average by 9 per cent over the period, while volumes were down 5 per cent. At John Lewis, shoppers purchased fewer so-called big-ticket items such as furniture and electronic appliances, which are typically more profitable, but clothing and beauty sales were resilient.
The group said that despite the uncertain economic outlook and consumer sentiment, it expected its financial performance for the year to improve. Both the department store and supermarket typically make three-quarters of their annual profits in the months before Christmas.
Kankiwala, who was appointed in March, said efforts to modernise the group were “well under way”.
Total net debt edged up to £1.6bn in July from £1.5bn in January, but the mutual expected to improve its debt ratio by the year end, which was 4.4 times at the end of last year. It does not provide an update at the half year.
