John Lewis turnaround strategy receives boost in the wake of M&S cyber attack
Robyn Duffy, Consumer Markets Senior Analyst at RSM UK, comments on today’s half year results from John Lewis: “John Lewis Partnership’s turnaround strategy is maintaining momentum, with the retailer reporting strong revenue growth in H2, driven by both its retail division and its food arm, Waitrose.
“Waitrose’s performance has been a key driver, benefiting from a renewed focus on its food proposition, including a greater emphasis on lower prices and a more effective adoption of technology to improve the customer experience.
“Meanwhile, the John Lewis retail arm is successfully drawing in customers through a combination of revitalised physical stores, a focus on meaningful brand partnerships, and the reintroduction of its Never Knowingly Undersold price matching strategy. The retailer is clearly thinking smart with its partnerships, tapping into the current nostalgia trend with the announcement that Topshop will return to UK high streets. Additionally, new collaborations with brands like Waterstones are designed not only to get the right products in-store, but also to increase dwell time and boost add-on sales.
“Wider market factors are likely at play in these results too. The recent M&S cyber-attack likely resulted in an unexpected windfall for John Lewis. With M&S’s online functions temporarily unavailable from April to June and stock on shelves significantly impacted, many consumers, particularly those in the overlapping target demographic, would have naturally turned to John Lewis as an alternative.
“The new packaging levy, higher National Insurance contributions alongside a deliberate increase in strategic investment saw John Lewis’ profits dip £3m in the first-half of the year. However, the picture is more stable than the headline suggests. On a like-for-like basis, profitability was broadly flat year-on-year – underlining that the core business remains resilient.
“With sales growth across both Waitrose and John Lewis, record customer satisfaction scores, and stronger cash generation, the Partnership looks well-placed to build on this momentum heading into the crucial second half of the year.
“As an employee-owned business, the question of a bonus for its partners will be a key point of interest when full year results come round. Given the current economic environment and existing cost pressures on households, it is likely the business will prioritise boosting everyday wages for its staff. This approach would bring longer-term security to the people who power the business, rather than a one-off bonus, particularly as pay growth slows across the wider economy.”