John Lewis sales growth Lewis has outperformed the total UK retail market in the first half year.
Gross sales reached £2.02 billion (inc VAT) and like-for-likes were up 3.1 per cent – although these are artificially inflated by eCommerce sales with brick-and-mortar store sales down 1 per cent.
Nevertheless, John Lewis has rightly evolved from having a multichannel view where online competes with offline to an omnichannel view where they complement each other. So while store sales are down on the year, stores will have contributed to the outperformance of the online channel via consumers browsing in-store and then purchasing online at home, or taking up the ‘click & collect’ option, making further investment in its physical presence essential in delivering total revenue growth.
To support this omnichannel approach, John Lewis has had to make significant investment in its fulfilment capabilities, with Magna Park due to open this month, to improve productivity, provide shoppers with a more competitive delivery service and to support future growth. This, alongside increases in pay, has come at a cost to the business, with operating profit falling by nearly a third to produce a margin of 2 per cent, against 3 per cent in the same period last year.
The second half is the driver of full year profit, however, so we expect it to narrow the gap on full year 2015/16.
Following a challenging 2015 for EHT, the division has achieved the highest growth in the first half, with sales up 8.4 per cent, benefiting from an 8.7 per cent rise in computing and tablets.
Private label investment and brand exclusives continue to be a crucial part of John Lewis’s strategy, with brands such as Finery, West Elm and most recently the launch of Modern Rarity strengthening its credentials and destination appeal. This comprehensive branded offer has helped to deliver fashion and home sales growth of 2.8 per cent and 3.7 per cent respectively.
Two store openings, range development and enhanced fulfilment capabilities will ensure John Lewis outperforms rivals in the remainder of the year.
Honor Strachan is lead analyst at Verdict Retail.
