How has John Lewis practically wiped out all his profitability within a year?

John Lewis is re-branding to John Lewis & Partners as part of his efforts to differentiate

The UK squeezes itself after the John Lewis Partnership, UK's High Street sweetheart, said the half-yearly gain fell almost 99 percent to just £ 1.2 million.

It is clear that the group behind the eponymous department store and the expensive supermarket Waitrose, which is considered highly as such, is not immune to the unrest that engulfs the sector and seizes its rivals House of Fraser and Debenhams.

Her problems, according to Julie Palmer at law firm Begbies Traynor, raise parallels with the fall of the Roman Empire, while exposing the extent of the misery of the High Street.

John Lewis is re-branding to John Lewis & Partners as part of his efforts to differentiate

John Lewis is re-branding to John Lewis & Partners as part of his efforts to differentiate

This brand was praised as the model to which everyone should follow and as a commercial and customer success – do not be mistaken, for the main street this is just as important as the fall of the Roman Empire, "she thunders.

But what do you eat with the profit of the group?

& # 39; Never Knowingly Undersold & # 39;

John Lewis, who recently awarded a new brand name to John Lewis & Partners, is chained to his "Never Knowingly Undersold" promise – his dedication to the price to match, even during Sale events and promotions.

Unfortunately for the department store chain, rivals Debenhams and House of Fraser have strengthened the promotional activity of late in an attempt to win back customers quickly.

In fact, the chairman of the JLP, Sir Charlie Mayfield, said that it has been the most promotional market for nearly a decade, with the number of discounting extravaganda doubled with that of the same period last year.

Matching the prices of his heavily discounting rivals hurts the fashion and beauty departments in particular.

Mayfield said Thursday that the company cost around £ 40 million in profits in the first half of the year, contributing to a dizzying £ 19.3 million loss in the department store chain, compared with a £ 54.4million gain in the first half of last year .

Despite this battle against the bottom line, the chairman promised to stick to the company's price promise – even in difficult times.

& # 39; Nobody has anything nice about it. It is extremely valuable and even times like these test the integrity of that promise. You also have to be able to cope with it in heavier times, "he claimed.

Some retail analysts, however, suggest that it is a promise that John Lewis & Partners can no longer pay – especially because the retail rivals have no sign that they are withdrawing from promotions and special offers.

And the promise has less value than ever, claim others, because it does not apply to the low prices offered by online retailers such as Amazon.

Brexit and the weaker pound

Mayfield told Brexit secretary Dominic Raab that Mayfield de Brexit played a role in the group's declining profits.

The retailer argued that cost inflation, as a result of the considerably weaker pound since the Brexit vote, was in the margins and thus suppressed the profit figures.

Mayfield said: & # 39;[Without Brexit] would the pound have gone down as it has? Probably no. & # 39;

John Lewis Partnership Chairman Sir Charlie Mayfield received some backlash to link the decline of profits to the Brexit with the Brexit Secretary Dominic Raab

John Lewis Partnership Chairman Sir Charlie Mayfield received some backlash to link the decline of profits to the Brexit with the Brexit Secretary Dominic Raab

John Lewis Partnership Chairman Sir Charlie Mayfield received some backlash to link the decline of profits to the Brexit with the Brexit Secretary Dominic Raab

In the immediate aftermath of the vote, retailers were largely hedged against such currency fluctuations, which means that the costs of buying goods from abroad did not change.

But when those hedging agreements expired, sourcing became more expensive – companies were affected to varying degrees, depending on their exposure and dependence on overseas procurement.

Now that the value of the pound is still lower than that of the dollar and the euro, some retailers, especially supermarkets, have started to pass on some of these cost increases to the shoppers. But given the high level of competition already present on the market and Waitrose's already pricey price, JLP was reluctant to do so.

It has grown in its margins to cover the higher costs instead.

It is clear that the weakness of the pound can affect large supermarkets, because this has a significant effect on real incomes and import costs. For those like Waitrose at the top, there is less room to recoup this loss with price increases.

& # 39; If a Brexit deal is reached, we'll probably see the pound up and up again. But whether this means that the will of John Lewis is in the sun again remains to be seen, "says Paul Mumford of Cavendish Asset Management.

JLP is far from alone in this issue: the reduced value of the pound was the nail in the coffin for retailer Poundworld with one price.

Brexit-related consumer uncertainty

Brexit has taken its toll on customers, with consumer confidence tumbling in the aftermath of the vote and remaining volatile if the negotiations are booming.

The partners of the partnership claim that this has contributed to the decline in profits, and expects that it will also have a negative effect on the profit for the entire year.

& # 39; With the level of uncertainty faced by consumers and the economy, partly as a result of ongoing Brexit negotiations, prognosis is particularly difficult, but we continue to expect profits for the whole year to be significantly lower than last year for the partnership as a whole, & # 39; said Mayfield.

Nerves around spending have manifested themselves most prominently in the & # 39; big ticket & # 39 ;, which includes expensive items such as banks, floors and white goods.

Carpetright cited a weak consumer confidence for a sharp drop in sales and closed stores urgently to prevent decay. Similarly, furniture company Multiyork beat the buffers at the end of last year.

It follows that the home category of John Lewis during the period was the weakest performer, with a sales decline of 4.2 percent, compared with a rise of 1.2 percent in fashion and a 7.8 percent increase in technology.

The half-yearly home sales of John Lewis fell by 4.2%

The half-yearly home sales of John Lewis fell by 4.2%

The half-yearly home sales of John Lewis fell by 4.2%

Mayfield claims that the falls in this category are caused by fewer buyers willing to splash on expensive furniture while remaining uncertain about Brexit and the impact this could have on their disposable income.

He said: "Home is the weakest of the three areas – it has a lot to do with consumer confidence. Purchases in the home are more extensible than in other areas. & # 39;

To overcome this, the company drives its product innovation in the home and furniture and expands its personal styling service.

& # 39; You have to create your own happiness, & # 39; said Mayfield.

Self-help

In that respect, it is reassuring to know that part of the wounding of the partnership is caused by the company, since JLP lowers its revenues to tighten the balance, to repay part of its debt and make it future-proof.

"We spend a lot of money every year on our two brands to stay current and progressive," Mayfield said.

The group has committed itself to maintain its investment levels of £ 400 million to £ 500 million per year, regardless of the economic environment.

In June, the company warned that earnings would be close to zero this year, as it would pump money into its IT systems and more unique unique & # 39; products and services.

For example, it has launched a new brand for women's clothing because it aims for 50 percent own brand products or exclusive brand products.

As the group shifts its focus to & # 39; differentiation instead of scale & # 39 ;, she has also pushed the button on a large re-brand – and she has added Partners to the John Lewis and Waitrose fascias for his 83,000 putting employees at the center of the company.

The new-look logo for Waitrose supermarket, owned by John Lewis Partnership

The new-look logo for Waitrose supermarket, owned by John Lewis Partnership

The new-look logo for Waitrose supermarket, owned by John Lewis Partnership

The retailer also paid part of its debt during the period, which Mayfield said, giving it a stronger position to face the current challenging environment.

Debts are a huge burden for High Street retailers and played a major role in the recent demise of House of Fraser, which dropped into administration after losing their debts of more than £ 1 billion.

To defend the cost of the lavish ads from John Lewis, Mayfield & # 39; never wins you by going into retreat & # 39; and claims that this investment yields the greatest return & # 39;

The profit malaise, as dazzling as possible, shows that even John Lewis has to take drastic measures to ensure that it survives the storm and fights for potentially more difficult times.

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