John Lewis reveals tough Christmas as key executive exits

Edgar the dragon had little to get excited about as John Lewis, whose Christmas advertising turned the cuddly reptile into a social media star, reported weak festive trading and the departure of a key executive.

The employee-owned company, regarded as a bastion of prosperous middle England, said same-store sales at the eponymous department stores were down 2 per cent in the seven weeks to January 4.

It added that Paula Nickolds, the managing director of the department store division who was to have taken a new role in a unified group management structure, will instead be leaving the group.

“After some reflection on the responsibilities of her proposed new role, we have decided together that the implementation of the future partnership structure in February is the right time for her to move on and she will leave the partnership with our gratitude and best wishes for the future,” said partnership chairman Charlie Mayfield, who is leaving at the same time.

The partnership also said that full year profit will be substantially lower than even last year’s depressed level, raising again the sensitive issue of the staff bonus.

“The partnership board will meet in February to decide whether it is prudent to pay a bonus,” said Sir Charlie. “The decision will be influenced by our level of profitability, planned investment and maintaining the strength of our balance sheet.”

Last year, John Lewis warned that its staff bonus might have to be suspended against a backdrop of highly promotional conditions and consumer caution. There was a bonus for that year, though it was the lowest in over half a century.

But this year’s sales performance at the department stores contrasts with a 1 per cent increase in the same period last year.

The performance at Waitrose, the upmarket supermarket chain, was more stable. Same-store sales were up 0.4 per cent.

John Lewis has been expanding its own-brand ranges to reduce the impact of its Never Knowingly Undersold promise, which obliges it to match the discounts on branded goods offered by more distressed competitors.

It has also been investing heavily in technology and customer service as it tries to differentiate itself from struggling mid-market rivals such as Debenhams and House of Fraser. 

With no access to equity capital markets, it has also shored up its balance sheet, halting new store openings and switching its generous final salary pension scheme to a more affordable defined contribution arrangement. 

Sir Charlie has also controversially overhauled the group’s management structure, scrapping the operating boards of John Lewis and Waitrose in favour of a single board. The arrangement is intended to facilitate co-operation between the two retailers and maximise sales to the many customers they have in common.

It will also save £100m a year, but some have criticised the move to centralise management ahead of the arrival of a new chairman — former Ofcom boss Sharon White — who has no retail experience.