9th Mar 2006 09:30
Lewis(John) PLC09 March 2006 Unaudited estimated results for year to 28 January 2006Strict Stock Exchange Embargo 9.30amThursday 9 March 2006 John Lewis Partnership Results for the year ended 28 January 2006 "Strong sales & profit growth in tough market" • Group sales ahead 8% to £5.8 billion • Operating profit* up 8% at £367 million • Profit before tax up 10% to £252 million • Partnership Bonus payment of £120m; 15% of salary (equal to almost 8 weeks' pay) • Group sales for 5 weeks to 4 March up 8% Waitrose • Strong performance across the business, with national expansion continuing to drive growth • Sales up 13% to £3.3 billion, driven by LFL sales growth of 4% • Profits** up 19% to £231m • First Waitrose shops to open in Scotland John Lewis • Strong Q4 performance and sales momentum continues • Sales up 2% to £2.4 billion • Profits** down 6% to £192m but broadly level on an underlying basis • Direct sales up 69% at £113 million. Direct business now in profit • £60m investment in Oxford Street store redevelopment underway * Operating profit before exceptional items and pensions.** Divisional profits are stated before corporate and head office costs. Sir Stuart Hampson, Chairman of John Lewis Partnership, commented: "2005 saw some of the most testing retailing conditions for well over a decade,but our storming performance in the final quarter delivered a strong improvementin sales and profit for the year. We achieved it by winning the trust of ourshoppers, building close relationships with our suppliers and focusing ondelivering quality, value and a better level of service. "We were delighted by the news that Waitrose and John Lewis had been votedBritain's favourite retailers in the recent Which? and Verdict surveys. Theseaccolades are a tribute to our Partners and our unique structure, but we are byno means complacent about our position and now have a new benchmark which wewill continually strive to live up to."We are pleased to announce today the acquisition of five shops which includestwo branches in Edinburgh, taking Waitrose into Scotland for the first time. "Looking ahead, whilst there is every indication that this year will continue tobe a tough one and that retailing in 2006 will not be for the faint-hearted,both divisions have made healthy starts to the new trading year. John Lewissales are 8 per cent ahead for the five weeks and Waitrose is up 9 per cent. Iam confident that we can sustain this momentum, and that we have the skill andthe stamina to build on last year's firm foundation." 2005 Results John Lewis Partnership announces its results for the year to 28 January 2006which showed strong increases in sales and profit driven by very strong tradingin the last three months of the year. A sales increase of 8 per cent contrasts with the general gloom being reportedabout UK retailing, and this translated into a final figure for profit beforetax of £252m - an increase of 10 per cent on last year. These financial results come alongside the two positive votes in the Verdict andWhich? customer surveys rating John Lewis and Waitrose as the UK's two favouriteshops - both an endorsement of what we've achieved over the last year and agreat foundation for the year ahead. The combination of these financial and customer measures of our performanceillustrate the impact of a company which is 'powered by its principles' -creating a business which shoppers know they can trust, which delivers a betterlevel of service and which enjoys close relationships with its suppliers. The commitment of Partners has produced this result, and the Partnership Boardis delighted to announce that £120m is to be distributed as Partnership Bonus ata rate of 15 per cent (representing almost 8 weeks' pay). This, together withthe £86m charged in 2005 for our non-contributory final salary pension scheme,demonstrates the full sharing amongst 64,000 Partners of the fruits of ourcollective success. Waitrose It has been a memorable year for Waitrose, with the impact of recentacquisitions showing through strongly in sales and profit. At the end of theyear we had 173 branches compared with 166 in January 2005, and in the last twoyears we have added a total of 30 branches to our estate - an increase of 33 percent in selling space. The maturing effect of this investment will continue toaccelerate our sales line for some time to come as new customers test out ouroffer and like what they find. Sales rose to £3.3bn, up 13 per cent, fuelled significantly by like-for-likesales growth in excess of 4 per cent - well ahead of the overall marketperformance. This underlying growth is a credit to the standards of presentationand customer service achieved in our shops as well as to the ongoing innovationand diligence in our buying teams. Alongside this core growth we have also benefited from the ex-Safeway branchesacquired in 2004 and those added during the year at Durham, East Grinstead,Lewes, St Katherine Docks and Wilmslow, as well as the branches we opened atDroitwich, Hersham and Lichfield. The performance of our new shops has been anencouraging sign of the customer appeal of the Waitrose offer in all parts ofthe country. Although we remain a relatively small player in the grocery sector, ourdifferentiated approach represents real consumer choice, and we continue toreceive a warm welcome from local authorities looking to develop the retailcredentials of their towns. Today's acquisition of five shops will take Waitrose with its distinctive offerof service and quality fresh food into Scotland and Derbyshire for the firsttime. There will be two new branches in Edinburgh, one in Buxton and two inLondon, in Balham and Barbican. Our increasing scale continues to deliver advantages in buying terms, but therehave also been numerous examples of improvements in our supply chain and inbranch productivity and efficiency, which have offset the additional cost ofoperating a third distribution centre and the unwelcome increases in propertycosts and fuel prices. Divisional profit increased by 19 per cent to £231m - a fine result in which allWaitrose Partners can take great pride. John Lewis The challenges of non-food retailing have been well covered by the nationalpress, and the first half-year saw a 1 per cent sales decline for John Lewis - aslow pace which continued right through the autumn. The division's response wasto focus on basic trading principles - improvements in our product mix, betteravailability, stronger presentation all supported by knowledgeable and courteousservice which we see as the heart of a department store offer. This approach helped drive greater footfall into our shops and achieved higherrates of conversion. Our sales built steadily all the way through to Christmasand continued strongly in January - a performance which secured our place at thetop of the Christmas trading table. We opened our new department store in the Trafford Centre in May - the first newspace for John Lewis for four years - and we now are well placed to continue todevelop our trade in the Manchester conurbation. Less happily, we have also hadto take the difficult decision to close Caleys, our branch in Windsor. Closureprovisions, together with the opening costs of Trafford, led to additional costsof £2m for the year. The importance of being a multi-channel retailer becomes ever more evident. JohnLewis Direct increased its sales by nearly 70 per cent, performing stronglythroughout the year and delivering outstanding sales levels in the Christmasperiod, whilst maintaining its high levels of service and delivery standards. Weare now firmly in profit with this part of our business. We are alsoincreasingly aware of the boost our department stores receive from thecatalogues and on-line information associated with John Lewis Direct, and thisyear's experience gives us growing confidence in our ability to build tradethrough all channels on the basis of trust in the John Lewis brand. Sales of audio/TV and electrical kitchen appliances were a driving force for thedivision, particularly since the introduction of the John Lewis branded range,but clothing also fared well. Furnishing sales were generally more difficultagainst a background of a slow housing market, but the final quarter saw awelcome change in this trend. Despite the shift in balance of merchandise salestowards audio/TV, gross margin for the division increased in percentage terms. Branch operating costs were well controlled, and further investment has beenmade during the year to improve branch productivity. Higher head office costsreflect the strengthened teams put in place to cope with the growth of thedivision as further new selling space comes on stream over the next few years. Manufacturing continued to be loss-making, but the restructuring undertakenduring the year (with one-off costs of more than £3m) has provided a platformfor us to establish a viable operation for the future in testing marketconditions. Divisional profit had been down 21 per cent at the half-year stage, but thestrong performance in the final quarter pulled the full year figure up to £192m,just 6 per cent down on last year. Excluding the one-off costs taken by thedivision, profit was broadly level with the previous year - a pleasing result insuch tough circumstances. Pensions and other costs Our commitment to keep open our non-contributory final salary scheme now makesus unique among major retailers - an example of our being 'an employer ofdistinction' which we are proud to maintain. The pension charge for the yearincreased by £2m to £86m. We have provided an additional £4m to cover the recently announced extension ofLong Leave arrangements and there is also a £3m additional charge resulting fromthe actuarial valuation of this liability. These extra costs have been includedin the divisional profit figures. Overall head office costs fell by 3 per cent. Ocado and exceptionals Ocado's popularity continued to win sales and customers throughout the year asit expanded its geographical coverage. It too enjoyed a powerful Christmasseason, which has carried over into the new year. As explained at the time ofthe half-year results, a change in accounting rules means that we no longer markOcado's losses against our own profits, and this shows in the reduced charge forthe year. The technical gain of £11m on our shareholding in Ocado logged at the half-yearstage is carried through to the full year figures and benefits the bottom line.However, balancing this against the exceptional gains included last year (mainlyproperty profits in Waitrose) and taking account of the restructuring and otherone-off costs this year, the underlying picture of progress achieved at theprofit before tax level is most certainly a real one. Capital expenditure Capital spending in 2005/6 was £286m compared with £556m invested in theprevious year - last year's figure was inflated by the acquisition of storesfrom Morrisons. This year there has been a substantial net cash inflow to thebusiness due to a strong sales performance and tighter working capitalmanagement. Partnership Bonus We have more Partners in the business now, particularly in Waitrose, and this,together with higher pay rates has moved the cost of each 1 per cent of Bonus 6per cent higher. The Board's decision to increase the bonus rate to 15 per centraises the total distributed to £120m. Outlook for 2006/7 Both divisions have made a healthy start to the new trading year. At Waitrosethe increase at week 5 is 9 per cent, with like-for-like sales continuing toadvance by 4 per cent. At John Lewis the robust pre-Christmas performance hascarried over to the new year, and sales are currently showing 8 per cent growth,up 6 per cent like for like. We have excellent products on our shelves and in the pipeline to continue tokeep our appeal to customers fresh. The engagement of Partners in 'Powered byour Principles' will, I have no doubt, sustain our point of difference incustomer service. There's every indication that the year ahead will be a tough one, with thehousing market remaining flat and indications of rising unemployment. Retailingin 2006 will not be for the faint-hearted, but I'm confident we have the will,the skill and the stamina to build on last year's firm foundation. -ends- For further information: John Lewis PartnershipSusan Donovan, Director of Communications Tel: 020 7592 6292Helen Dickinson, Head of Press & PR Tel: 020 7592 6274Helen Megaw, Corporate Press Manager Tel: 020 7592 6223 Hogarth PartnershipJames Longfield/Georgina Briscoe Tel: 020 7357 9477 An analysts presentation will be held at 10.30am in the Sloane Room at PeterJones, Sloane Square. This will be webcast and available on the website latertoday. Website: www.johnlewispartnership.co.ukNotes to Editors The John Lewis Partnership (www.johnlewispartnership.co.uk) is one of the UK'stop ten retail businesses with 27 John Lewis department stores and 174 Waitrosesupermarkets. It is also the country's largest example of worker co-ownershipwhere all 64,000 staff are Partners in the business. John LewisA typical John Lewis stocks more than half a million separate lines in any oneyear and seeks to be an all-under-one-roof destination for an entire region ofshoppers. Fashions, furnishings and household goods of all kinds are offeredwith excellent service and free delivery - all at competitive prices. 15,000lines focused on the best of home and giftware are also available online atwww.johnlewis.com. WaitroseWaitrose combines the convenience of a supermarket with the expertise andservice of a specialist shop. It offers fresh and frozen foods, wines andgroceries as well as delicatessen, cheese, fresh fish, meat, patisserie andhot-food counters. Waitrose is dedicated to offering quality, value and customerservice. Estimated results for the year to 28 January 2006 ============================== ========= ========= === ======= === 2005/06 2004/05 Change GROSS SALES £m £m % ---- ---- --- --- --- John Lewis 2,422.8 2,378.2 2 Waitrose 3,341.4 2,955.2 13 ------------------------------ --------- --------- --------- 5,764.2 5,333.4 8 Adjustment for sale or return sales (92.8) (89.2) Value added tax (522.4) (486.9) ------------------------------ --------- --------- --------- Revenue 5,149.0 4,757.3 8 ------------------------------ --------- --------- --------- PROFITS Divisional profits John Lewis retail 197.6 206.2 (4) Manufacturing (6.0) (2.1) 185 --------- --------- --------- John Lewis total 191.6 204.1 (6) Waitrose 231.4 194.5 19 --------- --------- --------- Total Divisional profit 423.0 398.6 6 Head office costs (55.9) (57.4) (3) --------- --------- --------- Operating profit before pensions and 367.1 341.2 8 exceptional items Exceptional operating items - 16.5 - Pensions (85.5) (83.4) 3 ------------------------------ --------- --------- --------- Operating profit 281.6 274.3 3 Net finance costs (35.0) (30.6) 14 Share of operating loss of associate (5.6) (14.1) (60) Exceptional gain on dilution of interest in 10.8 0.0 associate --------- --------- --------- ------------------------------ Profit Before Partnership bonus and 251.8 229.6 10 taxation Partnership Bonus (120.3) (105.8) 14 ------------------------------ --------- --------- --------- Profit on ordinary activities before 131.5 123.8 6 taxation Tax on profit on ordinary activities (36.7) (34.3) 7 ------------------------------ --------- --------- --------- Profit retained 94.8 89.5 6 ------------------------------ --------- --------- --------- Note: These results are estimated - the audited results for 2005/06 will be announced in April when the Report & Accounts have been approved by the Partnership Board ============================== ========= ========= === ========= === This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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