John Lewis sales grow, but profit falls as restructuring shakes up the business

The retailer reports a growth in sales, but blames omnichannel shift for a fall in operating profit

Retailer John Lewis has reported gross sales of £1.94bn and a 3% increase in like-for-like sales for the six months to 1 August 2015.

But while sales figures were on the way up, the same could not be said for operating profit, which fell by 16.3% to £47.1m. Parent company John Lewis Partnership attributed this to “restructuring costs, incremental costs for holiday pay and absorbing a greater share of centrally incurred functional costs” in its interim half yearly report.

The firm claimed the additional costs had come about as a result of a shift in channel and fulfilment, one of the many hazards of “operating in an omni-channel world”.

“Profit before tax and exceptionals was down by £33.8m to £96m, predominantly driven by higher pension charges arising from volatility in the market and last year’s property profits,” said Charlie Mayfield, chairman of John Lewis Partnership.

Overall sales across John Lewis may be up, but there has been a shift away from in-store sales and towards its online offering. Transactions in John Lewis stores saw their first decline in four years, dropping by 1.8%, while online sales through increased by 17.1% to £647m.

“Our main focus continues to be on investing in both our shops and online to maintain and develop our omnichannel proposition,” said the report.

This matches the ongoing omnichannel trend, and last year John Lewis saw a 25.6% year-on-year increase in online sales, accounting for over 30% of its total sales.

Read more about omnichannel strategy

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Sister firm Waitrose saw a growth in operating profit of 0.6% to £0.8m, but a 1.3% decline in sales was put down to “tough grocery market conditions”.

The luxury supermarket has restructured some if its fulfilment services, which involved closing a .com fulfilment branch in Acton and opening a purpose-built centre in March 2015.

Waitrose claimed the new fulfilment centre will increase its capacity to handle online orders across the London area by a third.

Click and collect is a growth area for the retailer, with a 50% increase in orders through this offering. It is introducing foreign exchange Click & Collect in almost 100 of its branches.

The supermarket confirmed the ongoing transformation of its IT capability to support initiatives such as Pick Your Own and its online offering.

Both brands have been working on restructuring to suit an online environment over the past two years, with John Lewis investing in technology startups and both John Lewis and Waitrose moving to Google Apps to fuel collaboration.

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