John Lewis Partnership Results - What The Analysts Said

By Steve Wynne-Jones
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John Lewis Partnership Results - What The Analysts Said

The John Lewis Partnership, which operates the Waitrose supermarket chain, as well as John Lewis department stores, has seen its profit before exceptional items tumble 21.9%, on the back of lower gross margins and weaker exchange rates.

Unsurprisingly, Sir Charlie Mayfield, chairman of John Lewis Partnership, described it as a "challenging year" for the business.

Here's how the analysts saw it:

Clive Black, Shore Capital

"The John Lewis Partnership's (JLP) FY2018 results made for quite sobering reading as the Group comes to terms with what it calls 'subdued consumer demand, political uncertainty and structural change'.

"Excluding exceptional items, John Lewis' operating profits rose by 4.5% whilst grocer Waitrose faced into considerable competitive challenge and margin pressure that took headline EBIT down by 32.1% and post-exceptional operating profit 41.9% lower. Waitrose management has decided upon a reset, that will make for a more value competitive offer but lower ongoing profitability compared to recent years.


"The pressure on H2 FY2018 gross margins at Waitrose can be expected to continue into H1 FY2019 before any benefit of FY2018s tough decisions start to feed through. JLP is facing into challenges and taking tough decisions that may position it better for the future."

Emily Stella, GlobalData

"This dip in profits was largely due to lower gross margins at Waitrose from a weak exchange rate and competitive pricing. Yet John Lewis staff will also bear the brunt despite relatively robust operating profit growth of 4.5%. This is despite heavy discounting towards the end of the financial year, initiated by Black Friday, and a significant rise in ‘never knowingly undersold’ price matches at the end of the year.

"Recent trading has unsurprisingly been significantly knocked by the recent snowfall – John Lewis reported that fashion sales were down 18.8% and home sales declined 17.2% year-on-year in the seven days to 3 March. For the first five weeks of the year, John Lewis like-for-like gross sales dropped 3.4%. And John Lewis may have been less impacted than some, particularly retailers in out-of-town retail parks and town centres where access is difficult for drivers."

Hannah Maundrell,

“It’s no surprise John Lewis have seen a fall in consumer demand, but to take more than a 70% hit to their profits is pretty worrying to say the least. It’s good John Lewis haven't passed on rising costs to consumers, but I do wonder how long they'll be able to soak them up for.


“With numerous high street retailers going into administration since Christmas, this news will surely have the John Lewis board members in crisis talks. With lack of wage growth and rising living costs it’s become evident that shoppers are tightening their purse strings and saving where they can. Cheaper supermarkets like Aldi and Lidl are growing in popularity which leaves Waitrose out in the cold. John Lewis on the other hand are battling an even bigger battle - the online retail market. The partnership has its work cut out to recover from this.”

Scott Ransley, Stifel

"It's worth paying attention to John Lewis's FY results (announced Thursday) as the group is dealing with similar competitive and structural pressures to Marks & Spencer in food and general merchandise, but operates far less non-food space (just 49 department stores). The key takeaways are the high cost of ongoing restructuring, competitive pressure in food, and weak current trading in non-food (snow, consumer)."

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.


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