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The boss of John Lewis has warned employees that the department store chain’s profits are being squeezed by “really tough” trading conditions that are hindering its turnaround efforts.
Jason Tarry, chair of the John Lewis Partnership, said in an interview last month with the employee-owned company’s internal magazine that John Lewis was having to deal with an environment where it “will trade into lower sales and higher costs”.
“We have to adjust for an immediate future that we weren’t expecting even six months ago, let alone a couple of years ago,” Tarry said in the interview, which has been seen by the FT.
“The team is heavily focused at the moment on what that means for us in terms of adjusting our plan going forward,” he added. A person close to the retailer said Tarry was not planning any major strategic changes.
The John Lewis Partnership, which also owns Waitrose, said at its annual results in March that it was taking a cautious outlook for trading in the year ahead.
Since then, the Strait of Hormuz has largely remained closed as a result of the conflict in Iran, which has kept oil prices elevated and added to inflationary pressures squeezing retailers and consumers.
“It is difficult when things are tough from a sales perspective, but we’re holding our nerve around our focus on margin improvement and firm stock control, rather than just trying to chase top-line sales,” Tarry said.
The partnership swung to a pre-tax loss of £21mn in the year to January from a profit of £97mn a year earlier. Available liquidity increased to £1.6bn.
Sales at Waitrose rose 7 per cent to £8.5bn, while sales at John Lewis increased by 3 per cent to £4.9bn. The retail group is scheduled to report half-year results on September 10.
Tarry, who previously ran Tesco’s UK business, has refocused the partnership on its core retail business since joining two years ago.
He recently scrapped a contentious project to build rental homes — launched by his predecessor Dame Sharon White — and has overseen an improvement in performance at Waitrose. However, John Lewis has continued to struggle amid longstanding pressures on department stores.
In the interview Tarry said the partnership was “taking the cash we generate and investing it back into the business, which is something we haven’t consistently been able to do over the last 15 years”. It has been opening new Waitrose shops and refurbishing John Lewis and Waitrose stores.
Asked about the pace of change under his leadership, the low-profile executive offered a blunt assessment for staff: “My honest counsel to anyone asking when it will end is that it will never end.”
He pointed to a “highly competitive, dynamic environment” that was being reshaped by an accelerating “fourth industrial revolution” driven by technology and artificial intelligence.
John Lewis said: “It’s no secret that trading conditions are challenging right now as people think carefully about their spending. Our priority is to do the right thing for our customers, so we’re continuing to invest significantly in our brands with new and refurbished Waitrose shops, and fresh propositions in John Lewis like our new beauty and sports halls and Platter hospitality offer.”
Source:
www.ft.com