John Lewis Partnership issues a profit warning and unveils strategy for the coming years.
H1: a disappointing result and next steps for the business
John Lewis Partnership, which owns John Lewis department stores and Waitrose supermarkets, has announced that profits for the first half will be “close to zero”.
Future strategy will focus on three key areas: differentiation over scale, maintaining investment and placing its partners at the heart of the business.
Chairman of the John Lewis Partnership, Sir Charlie Mayfield commented on the plans “The measures that we have outlined today are an important next step in our strategy that will ensure we emerge stronger from this period of profound change.”
Differentiation over scale: store closures
Future strategy will aim to create differentiation through innovation as opposed to scale.
Waitrose will focus more on its private label range and focus on building its range of exclusive products.
The retailer aims to boost its health credentials, a strategy we can already see emerging with its Bupa partnership and in-store nutritionist trial.
Waitrose currently operates 353 stores across the UK but is set to set to close four of its convenience stores and one supermarket, creating opportunity to invest in other areas of the business.
The branches that are set to close are located in Manchester, London and Birmingham. Four of these stores are set to be taken over by the Co-op and Aldi is taking on a site in Camden.
The partnership will instead look to provide a point of difference through enhanced focus on providing a stand-out in-store experience for its shoppers.
The partnership has emphasised that its transformation strategy requires maintained investment.
The partnership announced its aim of strengthening the balance sheet by £500m over three years to allow for investment in product and service innovation.
Value from property estate, a reviewed of the partner pension scheme and rebuilt profitability at Waitrose will help to drive this.
These steps will allow the partnership to maintain investment at a rate of £400m - £500m a year.
Partners at the heart
JLP will continue to invest in its partners, claiming that its partnership model provides a key point of difference within the industry.
As a result, the partnership will rebrand the two parts of is business to be ‘Waitrose & Partners’ and ‘John Lewis & Partners’ from September 2018.
Want to know more?
Retail analysis subscribers can read more about Waitrose’s strategic outlook here.