John Lewis says Christmas offer must be ‘irresistible’ amid weaker consumer demand
The retail giant says consumer demand for big-ticket purchases is now ‘more difficult’, putting more pressure on the John Lewis Christmas campaign to succeed.
With less than three months to go until Christmas, the John Lewis Partnership isn’t in the best place after posting disappointing half-year numbers.
Pre-tax profit at the group fell 53% to £26.6m in the first six months of the year. And even when redundancy and restructuring costs were stripped out, pre-tax profit was still down almost 5% at £83m as higher costs ate into margins.
Gross sales were up 2.3% for both its brands [Waitrose and John Lewis] – with revenue hitting almost £4.8bn, up 2.2% on the same period last year. Operating profit rose 10% for John Lewis but suffered an 18% drop for Waitrose, which was hit by price inflation.
According to the John Lewis Partnership, these numbers reflect one-off redundancy and restructuring costs as well as the decision not to pass on increased prices over to its consumers.
And speaking during a press briefing today (14 September), John Lewis’s managing director Paula Nickolds admitted convincing Brits to purchase big ticket items had become “more difficult”. However, she also insisted the retailer’s “differentiator of brand” would set it up well for the crucial fourth quarter.
When asked by Marketing Week how John Lewis plans to convince cash-strapped Brits – who are worried by the Brexit negotiations – to spend big over the festive period, she responded: “Christmas is an important part of the year and what we often see is as you approach the big day consumers choose to [spend more] and make the most of that family time. Ultimately, it will be about the proposition we put in front of our consumers.”
But with the GfK showing a persistent fall around Brits’ propensity to purchase big ticket items, it’s hard to shake the feeling John Lewis is entering one of its most challenging Christmas periods in recent years. And Nickolds conceded to Marketing Week that its advertising will have to be “irresistible” if it’s to turn things around in the second half of the year.
She added: “It is clear consumer confidence is in a challenging place but we don’t expect that to worsen [it should stay at the same level]. It is the job of all good retailers to put a campaign in front of customers at Christmas that is irresistible and that’s what we need to do to change things.”
When it revealed its full-year results back in March, John Lewis cut its bonus pay for the fourth year in a row. And according to new figures from the Reputation Institute this has impacted its workplace brand reputation.
John Lewis’ overall repetitional brand performance has remained relatively flat from 2015 to 2017, having scored 80.6 points on its RepTrak 2017 and ranking highly among fashion retail companies. However, workplace is among the areas which have suffered noticeable declines in consumer perceptions in the past year, now scoring 76.36 points compared with last year’s score of 80.6.