John Lewis and Waitrose have both posted positive sales during what was the worst Christmas for retailers since the financial crash in 2008 but the retailer’s owner, the John Lewis Partnership, has warned on profits as “weak consumer demand” increases pressure on the high street.
In the seven weeks to 5 January – which included John Lewis’s biggest sales week thanks to Black Friday – like-for-like sales at the department store chain grew by 1%, boosted by good performances in fashion (up 6.8%), beauty (up 11.2%) and own-brand womenswear (up 14.7%).
The home category, however, was down 2.5%, while the electronics category was up just 1%.
When asked during a press call whether its Elton John Christmas blockbuster had the resonance with people John Lewis was hoping for, managing director Paula Nickolds said: “The full figures are not yet available but we have 50 million views on social media, that’s 16% up on last year.
“It was launched brilliantly by our partners to the extent it was trending on Twitter within 15 minutes of launch. It’s a really important time of year for us and therefore the campaign remains an important part of our tools for Christmas.”
Nickolds said John Lewis was “pleased” with the number of pianos it sold over Christmas but again stressed that the ad was less about the piano and more about “thoughtful gifting”.
However, there are signs this year’s Christmas ad may not have performed as well for John Lewis as previous campaigns. According to research by System1, the ad scored just three stars in a ratings system that measures how people feel about an ad and how intensely they fell that aims to predict long-term brand impact on market share and likelihood of purchasing. By comparison, Monty the Penguin scored five stars in 2014.
The score also meant the Elton John ad only just scraped into the top 10 best Christmas ads, behind campaigns from brands such as Heathrow, Coca-Cola and Sainsbury’s. Many thought the campaign this year was too much Elton John and not enough John Lewis.
John Lewis Partnerships warns on outlook
At Waitrose, despite a sharp reduction in promotional activity, like-for-like sales increased by 0.3%, while online sales over the Christmas period were up 12.8%. As such, Waitrose says it is “well on track” to growing profits for the full year.
While Waitrose’s managing director Rob Collins said early analysis suggests the product-focused Christmas campaign “worked really well”, figures from Kantar Worldpanel show that Waitrose’s market share dropped by 0.2 percentage points to 5% in the 12 weeks to the end of 2018, putting it seventh out of the UK’s 10 biggest grocers.
Charlie Mayfield, chairman of the John Lewis Partnership, said gross margins remain under pressure in what has been an intensely competitive pricing environment – promotional activity around Black Friday was up 20% to 30% compared with 2017- and as a result profit will be “substantially lower” this year.
The John Lewis Partnership has also warned that it is considering whether to suspend the staff bonus scheme. The last time it was forced to make that move was in 1953, during rationing.