DIYWEEK.net

As a "highly competitive trading environment" impacts on John Lewis' profits for the first half, online sales soar 27%, with predictions johnlewis.com could achieve a turnover of £1bn by 2014.
John Lewis reported a 2.5% increase in gross sales to £1.42bn for the first half ended July 30, 2011. Like-for-like sales at the department store chain were up 1%, with home showing gains of 0.6% on the same period last year and electrical and home technology up 3.8%.

However, johnlewis.com was the star of the show, with an impressive 27.2% uplift in sales for the first half. The website already accounts for 19% of total John Lewis sales and continues to grow at a considerable pace. John Lewis attributes the rise to an increase in the number of products and brands sold online, coupled with the roll-out of its popular 'click and collect' service.

The retailer believes there is still a significant opportunity for growth in its online operation and predicts johnlewis.com will be achieving sales of £1bn by 2014. This figure is likely to bolstered by John Lewis' new online international operation, which saw the retailer start delivering abroad in June and is now live in 33 countries.

John Lewis' operating profit took a hit in H1, dropping 54.5% to £15.8m, as the chain invested in new stores and concepts. John Lewis Partnership chairman Charlie Mayfield said: "We have continued to invest in all areas of the business. New concepts are being introduced across all branches to ensure our shops remain appealing destinations in the new internet age."

New additions to John Lewis portfolio include the new department store in Stratford, which opened yesterday, as well as two more at home outlets set to open in Chester and Tamworth next month. The retailer has invested £75.7m primarily on these new ventures, as well as refurbishments at its Reading, Cheadle and Peter Jones stores.

The firm still sees growth potential in its bricks and mortar business and says it is continuing its strategy to grow its selling space and is "exploring" the idea of introducing full-line flexible format department stores in key locations in the UK. It has also announced plans for a new flagship store in Birmingham city centre.

John Lewis' profits were also impacted by its Never Knowingly Undersold price promise in what the department store chain described as a "highly competitive trading environment". However, the firm was satisfied that it still managed to gain market share in its three main directives, home, electrical and home technology and fashion.

Overall, The John Lewis Partnership, which also operates Waitrose, reported a 6.4% increase in gross sales to £4.05bn in H1, with a 23% decline in operating profit and an 18% decline in pre-tax profit to £90.4m.

Mr Mayfield said of the results: "'The partnership has made good progress in the first half. Sales grew strongly although, as expected, profits were lower than in the same period in 2010 as we accelerated investment in our future growth plans, even though conditions remained extremely challenging... We made significant investment in the first half and our capital expenditure increased by £99m to £254m."

Looking ahead, he added: "Trading conditions are set to remain challenging through the rest of this year and into 2012. We are not simply waiting for the recovery, but instead we have increased the pace of investment and innovation across the partnership putting us in the best possible position to seize the opportunity created by a rapidly changing retail environment. Our momentum is strong and I am confident we will build on that in the second half."