John Lewis Partnership unveils new strategy as it warns on profit
The John Lewis Partnership has announced the next stage of its strategy for developing and strengthening its business but has warned that current full year profit will be lower than in the previous year.
This will include a focus on differentiation instead of scale, maintaining a higher level of investment in product and service innovation, and recognising and enhancing the role that staff, or Partners, play in the differentiation of both its Waitrose supermarket chain and John Lewis department stores.
In a statement, the Partnership said the focus on differentiation will involve further investment in the development of unique products and services, as well as a greater emphasis on its own brands and innovation.
At Waitrose this will mean extending the range of exclusive products while continuing to raise the quality. This will include a bigger focus on its fast growing category of health and wellbeing. In addition, Waitrose staff in shops will become “food ambassadors” to advise shoppers.
At the John Lewis department store chain, the focus will be in the three key areas of unique products, personal service and expanding into new services. At the heart this, the retailer will develop a curated and targeted assortment. Key to this will be “supercharging” women’s fashion, acquiring new niche brands, securing exclusives with international brands and growing the retailer’s design capability. The retailer will also aim to increase the percentage of sales of own brand products from 30% to 50%.
In addition, the retailer will look to create an “exceptional” service experience in shops, empowering Partners through technology and investing in skills. It will also be expanding into new services including in the home services market and in financial services. Earlier this month, the Partnership acquired Opun which manages home improvement projects on behalf of customers.
John Lewis said it is currently assuming that full year profit before exceptional items will be substantially lower than last year. It is expecting to see profit growth in Waitrose, a decline in John Lewis and significant extra costs at the Partnership level due to more investment in IT which will be a big driver for improving profits.
Therefore, the Partnership will be taking steps to strengthen its balance sheet by a further £500 million over three years to invest in product and service innovation. This will be achieved by rebuilding profitability at Waitrose, creating more value from its property estate, and conducting a review of the Partnership’s pension scheme.
John Lewis said it will continue to make adjustments to its store estate in line with the plans. This will include the disposal of four Waitrose convenience shops and one small supermarket.
Looking at staff, John Lewis said it will continue to invest in pay and is aiming to make the Partnership one of the healthiest places to work by 2025. It has also announced that from September 2018, the two brands that make up the business will be known as Waitrose & Partners and John Lewis & Partners with more details to be revealed on this in the coming months.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said: “The John Lewis Partnership is a unique business with different ownership, a different purpose and a different outlook to any of our competitors. As retail changes we need to tread a path that enables us to thrive as a business while building on the qualities that make us different. For us, the relentless pursuit of greater scale is not the right course. Our plans put differentiation, innovation and Partner led service at the heart of our offer. 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.”
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