John Lewis has said its half-year profits before exceptional items will be “close to zero” this year, and predicted full-year profits will be “substantially lower” than last year.
The retailer said a “turbulent market” caused by weaker sterling, concerns over Brexit and increased discounting had hurt profits, adding that it planned to invest heavily in IT and services to “stay ahead of the competition”, as well as reducing its debt.
In the first half of last year the group, which includes the Waitrose supermarket chain, recorded profit of £26.6m. The retailer said it expects to be back in profit growth in 2019.
The business plans to raise £500m over the next three years to strengthen its balance sheet by reviewing property leases, head office operating costs and its pension scheme.
The partnership expects its cash position for this year to be in-line or ahead of last year and its liquidity position to be the best it has been for 10 years.
Sir Charlie Mayfield, chairman of the group, said: “It is a time of really significant change in retailing. We don’t have a crystal ball but we know the partnership is our business and no one else is going to take responsibility for it. It is very important that we feel the jeopardy of what’s going on in retail right now. We need to take responsibility and action to succeed.”
Mayfield said retail is facing two main challenges: an excess of supply versus demand and significant inflationary pressures.
“We are not expecting an improvement any time soon,” he added. “This is not a blip – it is a major shift. We are not being complacent: we are going to differentiate to add value for customers.”
The group is closing five Waitrose stores but said it is “not likely to close” any John Lewis branches. It said it would consider relocations and “right-sizing” – through which it may give some space back to landlords – for the department store.
Managing director Paula Nickolds, said differentiated product and services were essential to the retailer’s future success.
“Good is no longer good enough. To succeed, product needs to be special, and the environment needs to be more so. Our opportunity lies in differentiation. Product has to be at the heart of the retail proposition. Our product needs to be better and different. Quality and design are key.”
She added: “We are not immune to changing customer behaviour. We are reinventing once again. We have identified that our unique assortment and proactive customer service meet the needs of our customers.”
John Lewis plans to roll out new services – including the “experience desk” piloted at Westgate Oxford and personal styling services – to all stores, starting with 15 shops in the run-up to Christmas.
The retailer said customers who used its personal styling service spent 30% more in the year after their appointment than those who did not, and six stylists based in the new Westfield London store in White City drove 20% of total womenswear sales in the shop, which is double the average in other stores.
John Lewis plans to accelerate its own-brand and exclusive product strategy from the current 30% of sales to 50% over the next three years.
It will launch its largest own-brand collection for womenswear in September. It will be followed by a menswear range in spring 19.
In September, John Lewis and Waitrose will relaunch as John Lewis & Partners and Waitrose & Partners.
On Brexit Mayfield said Britain needs to be “realistic and pragmatic”. He added: ”A no deal Brexit is an unthinkable scenario, we [are all] unprepared for that. Leaving a trading union like the EU is a very complex task and if we leave without preparing chaos will ensue. [Leaving without a trade deal] is not something we should contemplate.”