It's swings and roundabouts for the John Lewis Partnership

It’s usually best to take a long view of the John Lewis Partnership, since that is how the employee-owned retailer tries to manage itself.

The verdict on the department store side, as opposed to Waitrose supermarkets, is not pretty: the latest operating profits of £115m represent their worst outcome for more than a decade.

That is remarkable when you remember that 10 years ago, the UK was mired in a banking crisis and recession. Even in the teeth of that storm though, John Lewis’s department stores did their stuff. In 2009, operating profits were £144m, followed by £166m in 2010. A steady march to £200m, achieved in 2013, followed. In 2015, £250m was reached and, within a few million, the same score was secured every year until 2018.

Now comes a 56% plunge, a jolting end to a winning streak. “We do not believe the market conditions are cyclical,” conceded the chairman, Charlie Mayfield. You bet. The evidence is in the numbers and there is little point debating the unquantifiable contribution from Brexit worries.

But let’s not call this a crisis. The headline profit figure for the department stores looks terrible, but only half can be attributed to weaker trading; the rest comes from higher property and IT costs. The latter squeeze will ease this year, so even in a slow retail market, it’s plausible that the stores will do better than £115m next year – even if the glory days aren’t coming back in a hurry. The “never knowingly undersold” price promise may prove hideously expensive while Debenhams and House of Fraser are thrashing around in pain, but John Lewis is right to stick with what it knows.

In the meantime, Waitrose, which suffered its own jolt a year ago, is heading upwards again, with an 18% recovery in operating profits to £203m. That implies a profit margin of 3.2% on sales of £6.4bn, which will very likely be better than most supermarket rivals achieve this year. That ain’t so bad, even if the loss of the Ocado deal is yet to be confronted.

Waitrose also offers a lesson in perspective. About 25 years ago, there was lively debate about whether the then-struggling supermarket chain should be ditched. Staff on the department stores side, who tended to see themselves as partnership royalty, reckoned their bonuses were being diluted. These things swing round: without Waitrose’s improvement this year, their thin 3% bonus might well have been zero.


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