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Market Commentary

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​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 19​ September, 2017

Consumer slowdown bites

Sales at John Lewis’ UK stores dropped 2% YoY in the 26 weeks to July 29, as economic pressures and a slowdown in high street sales continue to affect retailers. Total revenue rose 2.4%, helped by its online channel, while LFLs edged up 0.1%. Pre-tax profits for the Partnership fell 53% to £26m, due to higher costs and weakened customer demand. The weaker pound and uncertainties over Brexit also had an impact on performance.

Results from Next tell a similar story, as sales dropped 2.2% in the 26 weeks to July 30, while pre-tax profits fell 9.5%. However, the results were better than expected, and Next will “modestly upgrade” its sales and profit guidance for the full year. Sales were mainly driven by online, and compared to previous years, Next has seen a significant shift in profit between retail and directory. Retail profits fell 33.1% in the half-year period, while profits rose 6.3% in directory.

Despite the cautionary updates from two of the UK’s bellwether operators, retailers who embrace omni-channel, get their product ranges right and invest in innovation will continue to prosper. Although its online operation is growing, Next continues to open physical stores to serve customers wishing to collect and return orders, addressing the importance of omni-channel. And John Lewis recently revealed it will expand its professional services trade with the launch of home improvement services to maximise sales by encouraging customers to purchase more than just products.

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