Inflation hits John Lewis transformation timetable but half-year losses ease
The John Lewis Partnership (JLP) has revealed its transformation plan will take two more years to complete than expected, while revealing a drop in losses over the first half of its financial year.
The employee-owned company, in which staff are known as partners, said that a combination of higher costs due to inflation and a need for greater investment had hit its turnaround timetable.
It was originally scheduled to have been completed in the 2025/26 financial year and deliver greater productivity and efficiency to boost profits following years of disappointing financial performance.
The troubles have knocked its famous annual bonuses to partners, with staff getting nothing last year.
The partnership, which comprises the eponymous John Lewis department stores and Waitrose supermarkets, reported a bottom line loss before tax of £56.2m between February and July.
That was a 43% improvement on the £99.2m sum in the same six-month period last year.
The group reported a 2% increase in sales across the partnership to £5.8bn.
John Lewis sales struggled while Waitrose enjoyed stronger revenue over the six months to July
It credited demand for its beauty and fashion lines in John Lewis but said sales in technology and “big ticket home items” remained subdued given the evolving cost of living crisis.
Waitrose sales were up 4% to £3.7bn.
John Lewis had launched its five year Partnership Plan in 2020.
It targeted a return to profits of £400m through measures to date that have included job losses but has proved more tricky to deliver in the tough economic climate given soaring additional costs – £179m alone last year.
The partnership said on Thursday that achieving its strategy would take precedence over bonus payments, which were not paid for the last financial year.
At the same time, it forecast an improvement in its annual results for the 12 months to the end of January.
“While the economic outlook and consumer sentiment remain uncertain, on the back of stronger Waitrose trading and further efficiency savings in the second half, we expect an improved full-year financial performance,” the company said.
“We typically make most of our profit in the last three months of the year, so a successful peak is always critical.”
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Partnership chair Dame Sharon White, added: “The partnership is a unique model that has been tested and come through stronger many times in our 100 year history.
“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. Trust in the brands and support for the partnership model remain high.”
But Zoe Mills, lead retail analyst at GlobalData, said the company’s update was a clear setback.
“John Lewis & Partners has succumbed to the pressures of the cost of living crisis, as the mid-market player struggled to retain appeal in a retail market plagued by consumers seeking low prices,” she wrote.
Around 1.3 million people on low wages are to secure guaranteed sick pay for the first time in a bid to boost health and living standards, the government has announced.
Those earning less than £123 a week on average will be entitled to a sick pay equivalent of 80% of their weekly salary or the new rate of statutory sick pay (SSP) – due to rise to £118.75 per week in April.
Employers will have to pay whatever the lowest sum is under a compromise achieved following discussions with business leaders – already reeling from a looming hike to minimum wage and employer national insurance contributions announced in October’s budget.
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The new sick pay policy is expected to take effect next year but, crucially, it will apply from the first day of sickness rather than after the third consecutive day.
The government argues that the measure will keep more people off benefits and leave some up to £100 better off per week because they will remain in employment.
Work and Pensions Secretary Liz Kendall said: “For too long, sick workers have had to decide between staying at home and losing a day’s pay, or soldiering on at their own risk just to make ends meet.
“No one should ever have to choose between their health and earning a living, which is why we are making this landmark change.
“The new rate is good for workers and fair on businesses as part of our plan to boost rights and make work pay, while delivering our plan for change.”
Unions had argued for an even higher figure.
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The British Chambers of Commerce welcomed the outcome of the talks but said its members were still set to face further additional costs arising from the policy shift – on top of the budget measures due to take effect this April.
Jane Gratton, its deputy director of public policy, said: “Employers often struggle to find shift cover at short notice, leading to disruption for customers.
“The government’s impact assessment did not produce compelling evidence on the day-one rights issue, so there may yet be unforeseen consequences.”
The announcement was made as MPs debate the wider employment rights Bill amid reports the government could drop its commitment to a ‘right to switch off’ outside of working hours.
The Sunday Times also reported at the weekend that a series of amendments was likely to be tabled by ministers as part of government efforts to keep business sweet following a brutal backlash to the budget.
Business groups have argued that the £25bn annual hit from the employment tax measures will result in job cuts, poor pay awards and weaker investment – hitting the government’s growth agenda.
Rachel Suff, wellbeing adviser at the HR body CIPD, said of the additional sick pay plans: “Phasing in elements of the Employment Rights Bill and ensuring sufficient support and guidance for employers will be vital to making sure these measures work for employers and employees.”
Weapons companies’ share prices surged across Europe and the UK’s benchmark stock index reached a record high amid talks of increased defence spending.
The FTSE 100 index of the most valuable companies on the London Stock Exchange hit a level never seen before as arms maker BAE Systems saw its share price rise as much as 17.5% on Monday to its record high.
That share price rise added about £5.92bn to the company’s total value on Monday from the close on Friday afternoon.
Also boosting the FTSE 100 to a never-before-seen level was defence and aerospace firm Rolls-Royce Holdings whose stocks rose 6% at one point on Monday.
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Elsewhere on the London Stock Exchange, the bigger FTSE 250 index comprising more British companies was also raised by the anticipated growth in weapons spending.
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Its biggest risers were defence technology company QinetiQ and defence support business Babcock International, which climbed 10.3% and 9.3% respectively.
It was not just British arms businesses given a lift, across Europe stocks in such companies were on the up.
A Europe-wide phenomenon
Shares of Germany’s largest defence company Rheinmetall jumped 18% while Italy’s Leonardo was up 15%.
Expectations of more defence spending rose after European leaders got together in London to discuss greater funding for Ukraine in its fight against Russia and a possible EU-backed peace deal.
Why?
Prime Minister Sir Keir Starmer announced on Sunday a loan to Ukraine and a £1.6bn deal for a Belfast factory to supply missiles for the country’s fight against Russia.
Mr Starmer had suggested a coalition of European and other allies could defend a potential deal for Ukraine to “guarantee the peace” and increase military spending to do so.
He made the comments at a summit of EU leaders, along with Canada and Turkey, which had been planned for more than a week but took on urgency following the disastrous meeting and diplomatic breakdown between President Donald Trump and Volodymyr Zelenskyy at the White House on Friday.
The UK had already announced it would increase military spending to 2.5% of GDP – a measure of everything produced in the economy – by 2027.
Chancellor Rachel Reeves had also announced an extra £2.26bn for the Ukrainian war effort, funded by the profits made from hundreds of billions of dollars worth of Russian sovereign assets frozen since the start of the full-scale war in February 2022.
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