John Lewis profits surge

A World Cup boost for sales of televisions and an advertising campaign featuring cooks Delia Smith and Heston Blumenthal helped John Lewis Partnership drive a 27.8% surge in profits, the retailer said today.

The group reported market-beating results at its department stores and the Waitrose supermarket arm, with group-wide pre-tax profits of £111.2m (€133.3m) in the half-year to July 31.

But John Lewis warned it is braced for tougher times ahead after figures showed a slight easing in sales growth for the first six weeks of the second half.

After a resurgent opening half for the department stores, when like-for-like sales surged 12.3%, the group said sales have since risen 8.8%.

Waitrose shrugged off food price deflation that has hit many rivals, with same store sales growth of up to 4.5% in the second quarter. This has slipped slightly to 3.9% in the second half so far.

Charlie Mayhew, chairman of John Lewis Partnership, said: “For the remainder of this year and into 2011, we anticipate more challenging trading conditions as higher taxes and public spending cuts begin to bite and household disposable incomes come under pressure.”

But he said the group is confident it will continue to outshine the wider market.

Its warning of more challenging trading conditions will confirm fears across the sector, with the group seen as a bellwether of the UK high street.

Fellow retail giant Next said yesterday that consumer spending was unlikely to grow over the rest of the year, while shops are also battling against rising cost inflation.

Cotton prices have soared to 15-year highs in recent months, which is putting pressure on fashion firms.

Today’s half-year figures from John Lewis show a marked turnaround on a year earlier when profits fell 19.6%.

The Partnership’s department stores enjoyed a “strong recovery”, according to the group, following a 4.7% drop in interim sales last year when the recession bore down.

Demand for flat-screen televisions ahead of the summer’s World Cup tournament drove a 6.7% rise in sales within its home electricals department.

A 19.3% rise in fashion revenues also confirmed the success of a recent push in clothing.

But the company, which has 28 department stores and two John Lewis at Home outlets, said website sales were “at the heart” of the performance, with johnlewis.com posting 36.1% growth.

In the 231-strong Waitrose chain, the launch of new ads fronted by celebrity duo Delia Smith and Heston Blumenthal in March attracted 370,000 more transactions through its tills in the first two months.

The group said underlying earnings grew 3.1% to £132.6m (€158.9m) across the supermarket in the half-year.

It is accelerating store openings in the second half, while also preparing for the autumn launch of its cookery school, which will be based in North London.

It opened nine branches in the first six months and aims to launch another 15 Waitrose stores by the end of January, including eight convenience stores.

Industry data from researchers Kantar Worldpanel this week showed Waitrose gained market share in the 12 weeks to September 5, at 4.1% against 3.9% a year earlier thanks to the popularity of premium ranges.

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