John Lewis: Christmas now has 3 peaks
The department store, which also owns posh supermarket Waitrose, put out a relatively upbeat trading statement on Wednesday covering the 6 weeks to January 2. Here are the highlights:
- Group sales up 4.1% to £1.8 billion ($2.6 billion);
- Waitrose sales up 1.2% to £859.8 million ($1.2 billion)
- But sales are down 1.4% when you don't include sales from new shops opened since last Christmas;
- John Lewis sales up 6.9% to £951.3 million ($1.39 billion)
- But up a slightly more modest 5.1% when you don't include sales from new shops opened since last Christmas;
- John Lewis online sales up 21.4%, hitting 40% of all sales.
The key takeaway is that Waitrose had a disappointing Christmas, while John Lewis had a much better than expected time. John Lewis has managed headline sales growth - 5.1% not including new openings - despite a particularly warm Christmas that has left rivals like NEXT down at heel and sparked concern among retail analysts.
Clearly a tear-inducing ad that can wrack up 23 million views on YouTube helps get sales going. Online sales are growing well, which management will be encouraged by.
John Lewis chairman Sir Charlie Mayfield says in the statement:
This has been a strong Christmas trading period for the Partnership despite the non-food market seeing significant shifts in trade patterns and the grocery market continuing to be challenging.
Our performance reflects to a large extent the significant investment we have made in our distribution and IT capability. Despite the fact trade was even more concentrated across a number of very busy shopping days, our operations performed especially well.
One of the most interesting details of the updating is the "significant shifts in trade patterns" that Sir Charlie mentions. Traditionally, Christmas saw a slow ramp up of sales for retailers, starting in the last few weeks of November and peaking sometime around Christmas.
But now John Lewis says there are three peaks - Black Friday, Christmas, and the start of its clearance sales. Other than recent American import Black Friday, that list might not sound surprising. But John Lewis says sales are getting more and more bunched up around these peaks as everyone piles in at the same time.
That's a logistical nightmare for retailers. On Black Friday, John Lewis' distribution teams were processing the equivalent of 5 parcels per second. That's why Sir Charlie is keen to highlight John Lewis' investment in distribution and IT - it needs to do this to keep its system from collapsing.
But five parcels per second means the operation is surely almost, if not already, at capacity. Retailers would much rather sales were spread out more evenly across the period, rather than bunch around these three new peaks.
John Lewis has left its profit forecast for the year unchanged at between £270 million ($395.4 million) and £320 million ($468.6 million), a dip from last year's figure of £342.7 million ($501.9 million). But the retailer is keen to stress that this is mainly down to a £60 million ($87.8 million) hit it's taking on its pension fund because of market volatility.