John Lewis, the owner of popular retail brands John Lewis and Waitrose, has reported a loss of £92 million before tax and exceptional items for the first half of 2022. This is a significant contrast to the profit of £69 million from the same period last year. However, the company noted that it is not uncommon for them to experience a loss in the first half of the year, as their sales heavily rely on the Christmas season.

It’s important to note that the reported loss does not include exceptional items, such as the reduction of office space in London. When these items are taken into account, the pre-tax loss for John Lewis amounts to £99 million. The company attributed its loss to the impact of inflation on consumer spending and changing customer trends following the COVID-19 pandemic.

Despite the overall loss, John Lewis highlighted that its fashion category has been performing exceptionally well in its department stores. The company also noted a year-on-year increase in customers, with a 6% growth in Waitrose customers and a 4% growth in John Lewis customers. However, these customers are spending less due to increased costs caused by inflation.

In terms of spending patterns, John Lewis observed a shift in discretionary spending from high-margin household items to restaurants and holidays. This resulted in a 5% decrease in sales for Waitrose supermarkets compared to the previous year, while John Lewis department stores experienced a 3% increase in sales.

The growth in sales for John Lewis department stores can be attributed to the return of physical retail stores, with in-store sales accounting for 41% of total sales during the first half of the year. This marks a significant increase from the 26% during the previous year, which was impacted by the pandemic, but still lower than the pre-COVID rate of 60%. The company noted that city center stores, likely due to the return of office working, have shown the strongest recovery.

Fashion emerged as the top-performing category for John Lewis, experiencing a 25% growth compared to the previous year. The company saw strong performance in holiday wear, indicating a rebound in travel and summer breaks. However, the home and technology categories witnessed declines in sales.

John Lewis acknowledged the impact of rising living costs on consumer spending patterns. Its own-brand, Anyday, saw a 28% increase in sales year on year. The company reported a strong customer base, with half a million more people shopping with John Lewis compared to the previous year, bringing the total customer base to 12.2 million.

To support its employees during the challenging economic climate, John Lewis announced a one-off cost of living support payment of £500 for full-time employees and an increase in the lowest rates of pay. The company expressed confidence in its ability to navigate the challenges posed by inflation, citing its strong balance sheet, loyal customer base, and deep understanding of customer preferences.

However, John Lewis emphasized that a successful Christmas season is crucial for the business to generate sufficient profit to provide a Partnership Bonus to its employees. The company recognized that the economic outlook and consumer sentiment will play a significant role in determining its overall performance.

Useful links for more information:
1. John Lewis
2. Waitrose