John Lewis turnaround struggling as Waitrose declines
The British department store icon John Lewis Partnership continues its turnaround with £-234 million in losses. The losses mark the first time in Partnership history when the yearly Bonus for employees is not paid. The decline comes on the back of a turnaround strategy where the partnership aims to make the company leaner, simpler and faster in the omnichannel world of retailing.
Online share among the biggest in the industry
With regards to omnichannel, John Lewis is one of the most advanced companies selling online. The department store part of the partnership, John Lewis, has for years had a major part of revenue coming from online. Even after the pandemic, online represents 59% of all revenue for John Lewis. Even the grocery arm, Waitrose, reports 14% of revenues coming from online.
With such a high share of revenue coming from online, it is understandable that the online business was not able to grow after the unprecedented pandemic times. Despite the decline in revenues, online revenues are still almost 50% higher than before the pandemic. Online was already 40+% of revenues prior to the pandemic.
Changing retail landscape as a challenge
The troubles of the partnership are partly due to the changing nature of the retail landscape for department stores. John Lewis is one of the last big middle-class department store chains left standing. Alongside M&S John Lewis has been serving the middle-England. With the rise of online, the discount retailers and the grocery non-food offerings, John Lewis has seen difficulties in finding growth.
At the same time Waitrose, which has grown handsomely for decades (surpassing the department stores in revenue), has seen declining revenues as the focus in grocery purchasing has focused more on price.
It remains to be seen how well the transformation plan of dame Sharon White manages to attract customers. At least John Lewis is very well positioned with one of the loved brands in the country. The huge online business is also a big strength for John Lewis as it moves to serve the customers in an omnichannel way.
The wider assortment of John Lewis is a threat and an opportunity for the company. The breadth of assortment makes John Lewis better positioned to many other department stores, which have focused mainly on fashion. However, the big share of revenue from technology products (36%) can become a liability as electronics retailers have struggled to find growth. Can John Lewis maintain growth in this difficult category?
The other big threat for the partnership is the future growth of Waitrose. Can the upscale grocer remain competitive in these high inflationary times?