John Lewis Partnership said it enjoyed a positive Christmas trading period but it continues to expect profits to be “substantially lower” this year due to slower sales growth, weaker margins and higher costs.
Total gross sales in the seven weeks to January 5 came to £2.21bn, a 1.4% increase compared to the same period a year ago.
Sales at Waitrose, excluding fuel, amounted to £1.05bn, up 0.2% from a year ago and 0.3% higher on a like-for-like basis, despite reduced promotional activity. In the lead up to Christmas, Waitrose increased own brand festive products and introduced 25 new vegan and vegetarian items.
John Lewis sales rose 2.5% to £1.16bn and on like-for-like basis sales increased 1.0%, led by growth in beauty and womenswear sales. The group said it made progress with its own-brand and exclusive products, particularly in womenswear.
Defying a high street downturn
“Two main factors are affecting the retail sector - an oversupply of physical space and relatively weak consumer demand,” said chairman Charlie Mayfield.
“Despite this, we had a positive Christmas trading period thanks to the extraordinary efforts of partners in our business, delivering differentiated products and service to customers.”
However, the group still expects full-year profits to be much lower as the sales growth delivered over the Christmas period was not enough to boost its overall performance.
Staff bonus in doubt
Mayfield said the actions taken in recent years to deal with the pressures in retail mean the company has the “financial strength and flexibility” to pay a modest bonus to its staff this year without affecting its investment programme.
“However, the board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time,” he added.
Last summer the company outlined a three-year strategy to differentiate products and services, invest £400mln to £500mln a year in the business and strengthen its balance sheet by more than £500mln.
John Lewis expects to deliver “significant positive” free cash flow this year and reduce debt by £150mln.