Robust sales for Waitrose and John Lewis

In the half year, Waitrose saw sales rise by 7.8 per cent while John Lewis sales rose by 6.6 per cent.

A very robust set of results from the Partnership are tempered only by the fact profit, on a before tax basis, was down some £42.9m to £68.5m; something that will, ultimately, impact on next year’s bonus pot. However, given that this fall was the result of exceptional items (mostly an adjustment due to changes in holiday pay policy), while disappointing it is not indicative of the underlying performance of the business. Indeed, when exceptional items are stripped out, the Partnership’s profit increased by 3.9 per cent or £4.4m.

Profit aside, the sales numbers clearly demonstrate that despite its good run of growth, the Partnership remains firmly on the front foot with both sides of its business notching up very strong performances.

In our view, the biggest single weapon in the Partnership’s armoury remains its ability to take a long term view of the market and invest appropriately in areas that it sees as delivering future value. This is certainly a function of the freedom which comes from being an employee owned, rather than a public, company. It is also, however, down to the culture and attitude of the business and its management which have, over the past 5 or so years, injected a real sense of pace and purpose throughout the organisation.

John Lewis

Off the back of a strong set of comparatives John Lewis has maintained its momentum and confirmed that it remains one of the success stories of British retail. While recent years have seen sales propelled by a strong programme of new store openings, the latest like-for-like figures – which significantly outstrip those of total UK retail – underline the fact that investments in stores, systems and assortments are all helping to drive growth across the business.

Despite its performance, John Lewis remains paranoid about becoming complacent which has helped to foster culture of energetic self-appraisal and reinvention. This, in a market which is rapidly shifting and reshaping, is one of the keys to its continued success. Indeed, it would not be unreasonable to say that John Lewis is firmly in the vanguard of innovative and forward thinking retailers.

The practical implication of all this is that, to consumers, the offer, service and proposition are perhaps more relevant today than they have ever been. For example, in fashion John Lewis has been quick to respond to the flight to quality with brands such as Alice Temperly and John Lewis & Co – both of which have a strong appeal to clearly defined target audiences. Equally, John Lewis has been responsive to the greater demand for personalisation and customisation in home products with its "bespoke" upholstery service. Innovation also extends to online where, as well as an extensive overhaul to the website, new delivery options such as Collect Plus have been trialled.

If innovation is important, it is nothing without proper execution. This is another area in which John Lewis arguably excels. Although the company has a lot on its agenda, it usually takes the time to think changes through and ensure they are properly delivered. The upshot is that the vast majority of the developments it puts in place deliver good returns.

Current and past success is all well and good; however, maintaining this for the future is what really counts. On this front, we hold with our view that John Lewis will significantly outperform the market over the medium term. A new pipeline of stores, further range innovation, continued investment in the website and fulfilment, and strong marketing campaigns will all underpin future growth. It is also true that despite the fact the business is now much larger than it was 5 years ago it still has massive headroom for growth in terms of both new customer acquisition and geographical expansion.

Waitrose

In a flat grocery market Waitrose put in a stellar performance with significant advancements in both total and like-for-like sales. This comes off the back of a long period of market outperformance, over which time the grocer has successfully grown its market share against the backdrop of a very tough, competitive trading environment.

Particularly pleasing is the success of the online operation, where sales were up by 40.6%. This is the result of both strong marketing and investment in fulfilment capacity to increase slot availability for consumers.

Innovation remains at the heart of Waitrose’s success. On the food front this manifested itself in the redevelopment of the Menu range, an enhancement and extension of home-baking products, and extending the premium Heston range of products to new categories. Outside of food Waitrose has also been proactive in seeking out new sales opportunities, such as in gardening where it developed a new horticulture range designed to appeal to its largely green-fingered customer base. In a market where food volume growth will remain sluggish, indentifying such incremental sales opportunities has become increasingly important and is something that will deliver growth for Waitrose over the longer term.

Store investment and enhancement will also help drive sales over the medium term and is also important in terms of allowing Waitrose to maintain its service differentiation. In this regard the new service desks the company is introducing will help improve service standards for click-and-collect shoppers as well as underlining many of the (often previously ‘hidden’) added-value service Waitrose offers, such as flower wrapping and the loan of glasses or fish kettles.

Although the grocery market will remain challenged in terms of volume growth, our view is that Waitrose will continue to build share. A combination of new store openings, a continued commitment to value, the growth of convenience and online, and some conservative expansion of the non-food offer will all underpin this success.

Photograph: Getty Images

 Managing Director of Conlumino

Photo: Getty
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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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