john-lewis-partnership-plc-annual-report-2015

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62 John Lewis Partnership plc Annual Report and Accounts 2015 Waitrose performance (continued) FINANCIAL review Gross sales for the year grew by 6.5% to £6.51bn (4.6% on a 52 week basis), with like-for-like sales up 1.4%. On average, we had 400,000 more customer transactions a week compared to last year, and our market share grew to 5.4% (Kantar). Operating profit was down by 23.4% to £237.4m (down 24.4% on a 52 week basis). This was held back by a significantly higher level of investment in the year in new branches and IT resilience, and the impact of one-off items. The year-on-year impact on our profits from these factors was approximately £30m and £27m respectively. The remaining profit decline of £26m, after excluding property profits, is primarily the impact of trading in a highly competitive and deflationary market. One-off items include property impairments and onerous lease costs (£16m), and costs associated with the planned closure of our Acton dotcom fulfilment centre (£4m). In 2014/15, we opened 13 new core branches (including eight acquired from the Cooperative) and another 20 convenience shops. The launch costs associated with this opening programme and the expected lower returns from new space in the early months both impacted profit this year. Performance against divisional KPIs Gross sales growth % 4.6% 6.7 6.0 4.6 53 weeks: 6.5% Operating margin % 3.9% 5.4 5.4 3.9 53 weeks: 3.9% Selling space m sq ft 5.9 Cash from operations £559.8m 2014: £477.4m 2013 2014 2015 2013 2014 2015 5.3 5.5 5.9 2013 2014 2015 Like-for-like sales growth % 1.4% 3.4 5.1 1.4 2013 2014 2015 Gross sales per average FTE £000 188.5 198.2 197.2 188.5 53 weeks: 191.9 Gross sales per selling sq ft £ 1,124 1,111 1,126 1,124 53 weeks: 1,145 Capital expenditure £388.5m 2014: £287.7m 2013 2014 2015 2013 2014 2015 We have Click & Collect lockers in six places – including London Underground.
Annual Report and Accounts 2015 John Lewis Partnership plc 63 customer review Our significant investment to create Modern Waitrose saw us investing in new and existing space, improving our IT capability and strengthening our distribution network. In addition we continued to build our online business, convenience offer, hospitality and services in our branches and – through the myWaitrose card – our understanding of our customers. Investing for the future One of the most visible and impactful aspects of our IT investment has been the rollout of more than 4,000 iPads this year. This programme provides branch management teams with easier access to information. It supports enhanced customer service by, for example, being able to answer product queries on the shop floor. Behind the scenes, we have invested in supply chain efficiency to support our growth. Work has started on the first National Distribution Centre in Milton Keynes, which is due to open in summer 2015 and will handle 25,000 longer-life ambient products. Omnichannel retailing Our online business was another area of investment and strong performance. Grocery gross sales were up 31.2% (on a 52 week basis) and we saw 5% growth in average order value. Our new specialist wine website – Waitrose Cellar – launched in May, and we introduced Click & Collect for wine orders in October. In addition, more branches handled Click & Collect for John Lewis orders, supported by new processes that are making the service faster and more efficient. Building enduring customer relationships We are deepening our understanding of and relationships with customers through our myWaitrose card. The number of customers with a card is now 5.4 million and 68% of sales are to cardholders. By using the information customers make available to us, we are increasingly able to target promotions and personalise our offers to customers. As a result, in the last year we have doubled the number of tailored customer communications. Product innovation and value In the context of food price deflation and increased competitor activity we continued to invest in value. This included matching Tesco on branded products (excluding promotions), and Sainsbury’s on own-label. We increased promotional participation and special deals for myWaitrose customers, including 10% off hundreds of everyday products each week. We launched 4,900 new or improved lines last year. Waitrose own brand grew sales by 5.6%, outperforming the market (Kantar). One of the highlights was the Horticulture and Garden range, with impressive growth driven from the new outdoor pods in 167 branches. Helping customers live healthier lives As a grocery retailer, we have a role to play in helping to tackle growing societal problems associated with poor diet and lifestyle, such as obesity and diabetes. Between 1993 and 2012, the proportion of the population considered obese increased from 13.2% to 24.4% for men and from 16.4% to 25.1% for women 1 . As part of our Living Well initiative, we are making continuous nutritional improvements to the foods and drinks we offer through our work with suppliers. This includes highlighting benefits such as ‘5 a day’ and the importance of vitamins and minerals in our diets. We track nutrition progress through regular measurement of our key suppliers’ nutritional data. Examples of our work in 2014/15 included removing more than 2,000 calories and decreasing fat by 6% from our sandwiches, and removing nine tonnes of saturated fat and over 60,000 calories from annual sales of key lines in our chilled patisserie range. Through better labelling and promotions of our products and services, we can help customers make healthier and more sustainable choices. We have also signed up to the food commitments under the Government’s Responsibility Deal to support public health goals. These include calorie reduction, promoting fruit and vegetable intake, salt targets, saturated fat reduction, out-of-home calorie labelling and front-of-pack labelling. We report our progress publicly via the Department of Health website. 1 www.hscic.gov.uk The Waitrose way The Waitrose way brings our corporate responsibility programmes to life for customers and Partners. It is based around four pillars – Championing British, Treading Lightly, Treating People Fairly and Living Well. These pillars put our work around health, environment, sustainable agriculture, community investment and responsible sourcing into context. Compelling reasons to visit our branches Hand-in-hand with building our online presence, we want to give our customers reasons to visit our branches with offers and services they can’t get on a website. So we’ve invested in new welcome desks, display units, seasonal bays, perch tables, gardening pods and horticulture. These developments have generated over £100m of extra sales since roll-out. Introduction Partnership difference Principles Strategy Performance Governance Financial statements
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