Don’t get too carried away by the John Lewis Partnership’s prediction of a “significant uplift” in profits this financial year. Last year’s outcome, after three years of losses, was a modest £56m, so any figure above £100m-ish could qualify as a “significant” advance. The real target – the partnership’s definition of a “sustainable” return – is £400m, which isn’t scheduled to arrive until 2027-28, two years later than originally intended. The turnaround plan is still firmly in turning territory.
Equally, though, let’s not be too churlish. This is the first time in ages that the partnership has been able to use words such as “buzz” in a positive way. The return of the “never knowingly undersold” slogan to the department stores in a revamped form points to greater self-belief. It is only a couple of years, remember, since the departing chair Dame Sharon White was chucking out the price pledge and scaring partners and customers alike with her vague thoughts on bringing in outside investors to the employee-owned business.
As always seemed likely, the surer route out of the hole was old-fashioned cost-cutting and back-to-basics retail discipline. A balance sheet that looked overstretched in the Covid period (thus the panic) should emerge next year, after the repayment of a £300m bond in January, with borrowings substantially below the levels of 2019. There is still a hard-to-ignore deficit in the pension fund (239m as at January this year) but no reason to think it will imperil the plan to invest £2.4bn in the business over four years. The partnership is no longer living off pauper’s rations on the investment front. White could have made that boast legitimately in her last day in the post but, oddly, said nothing.
That will only heighten expectations for what her successor, Jason Tarry, the ex-Tesco man, might say about strategy. Is he, for example, as committed to the adventure into building and owning a portfolio of 10,000 buy-to-rent flats? Many supermarket chains have converted old premises into flats but most then sell the properties rather than operate them. If this were a public company, shareholders would be asking questions about the potential for drift and distraction.
Still, Waitrose has recovered its trading momentum after a soft patch, which leaves the John Lewis department stores (plus its website) as the prime focus. Sales were down 3% in the first half despite the now familiar report of having more customers. Christmas will be the first test of the reinvigorating powers of “never knowingly … ”, since tech gadgets, top seasonal gifts, are where the bite has been felt most keenly in the recent past. If the department stores can arrest the phenomenon of punters seeking free advice from John Lewis partners and then buying their laptops and suchlike on Amazon, there is clearly scope for improvement.
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Add it all up and the next question is when partners can expect a bonus again after two years of doing without. The chief executive, Nish Kankiwala, was noncommittal, as he would be at this stage. But a token bonus doesn’t feel impossible. John Lewis is still miles behind Marks & Spencer in the buzzyness stakes, but self-help is working.