Times are tough at the checkout for John Lewis and its sister chain Waitrose, as the employee-owned retail group is expected to report its second full-year loss later this month.
The retailer is parting ways with the head of its department store chain and celebrity chef Heston Blumenthal, who has cooked orange-filled Christmas puddings and other eccentric goodies for Waitrose. Things have gotten so sticky that even the staff golf course is for the chop.
So what went wrong at Central England’s favorite retail group? Have his fans switched to Aldi or been lured away by a resurgent Marks & Spencer?
1 Financial problems
John Lewis Partnership is expected to report an annual pre-tax loss before one-off of around £50m compared to a profit of £181m last year, largely due to difficulties at its supermarkets.
According to independent retail analyst Nick Bubb, one-off effects such as write-downs on the value of some of its supermarkets and the restructuring of its headquarters are expected to contribute a further £100m to the losses.
He forecasts the group’s revenue to fall slightly to £10.6 billion from £10.8 billion a year ago, hit by a decline at Waitrose, which has been losing market share since September 2021.
The partnership has spoken about efforts to keep costs down, laying off thousands of employees at headquarters in recent years and even turning down lights and heating to save money. Investments in stores are understood to have been put on hold in recent months.
However, the group still bears higher costs than its competitors, not least because of its range of staffing services such as hotels, sailing club yachts and the soon-to-be-sold golf course at Maidenhead, Berkshire.
The partnership had $1.4 billion in debt at the end of its most recent fiscal year in 2025.
The group is a private company, which means it is owned by its employees. So it can’t issue new shares to the public to raise money. With debt markets strained, the partnership relies heavily on its cash resources to invest in tough times.
2 cost of living crisis
With John Lewis and Waitrose at the more expensive end of High Street, shops have had a tough year as inflation means there is little leftover money to shop.
Waitrose’s sales have fallen as its customers try out discounters like Aldi and Lidl.
During past economic crises, Waitrose’s customers switched from eating out in restaurants to buying ready meals. This time, after a long period of social exclusion, those who have the extra money happily spent it on evenings.
Launched during the credit crunch in 2009, Waitrose’s budget Essentials range aims to help the chain retain more budget-conscious shoppers. The retailer has just recently stepped up its promotion of Essentials alongside £100m in price cuts. Some analysts say Waitrose has been moving too slowly to adapt and may have lost buyers to rivals.
Waitrose boss James Bailey says: “Of all the things customers want us to spend money on, price isn’t in the top three or four. However, all customers are feeling the pinch.” He suggests that last year’s price cuts may not have made a huge difference to shoppers, but “now is a great time.”
To cut costs, the supermarket also slashed the benefits of its loyalty card, ditching free coffee in 2020 and newspapers last year, but was recently forced to bring back the hot drinks to keep shoppers on the side.
Department stores were prepared for the cost-of-living crisis after launching the budget Anyday range in 2021. Sales have been good – particularly in fashion – and the range has attracted younger shoppers. Overall, however, the department store’s sales growth is expected to be modest: high-priced items such as technology, beds and sofas were impacted by weak consumer confidence.
3 step back online
John Lewis has proven to be a huge hit online, with digital sales accounting for 60% of the department store’s sales for the half year. However, click-based commerce is slowing after the pandemic boom. Half-year department store sales rose just 3%, despite underlying price inflation flattering the numbers. Rising costs for deliveries and processing returns are likely to weigh on profits.
Waitrose is understood to have seen all of its fall in sales last year have been online, which now accounts for just over 12% of sales, down from a peak of 15% as shoppers have now changed their habits amid Covid fears -19 have resolved infection.
4 Tougher competition
John Lewis’ competitors have shifted up a gear.
For groceries, Marks & Spencer has reduced prices on essentials and expanded its range to appeal to a more family-friendly crowd. Linking up with Ocado may have been difficult, but M&S, which replaced Waitrose as the online specialist’s partner, generated a lot of publicity and new online competition.
When it comes to clothing, too, M&S appears to have regained its mojo, benefiting from a general shift towards more durable and formal clothing and affiliations with other brands.
For John Lewis, that means more competition for middle-aged and middle-class buyers.
In housewares, Dunelm and Ikea have shot at the John Lewis market. Ikea’s move to London’s Oxford Street later this year will only up the ante after investing heavily in online.
Dunelm, meanwhile, has opened up stores and places a high value on price at a time when this is more important to shoppers.
5 Stuck strategy
With department stores challenged by the rise of online shopping and cheaper competitors from Waitrose opening stores quickly, where will the group find growth?
Small deals – for both Waitrose and John Lewis – have been highlighted as a potential future.
Bailey says “the biggest growth opportunity is convenience stores,” but openings have been held back by a slump in investment in recent months.
With the sudden departure this week of department store boss Pippa Wicks, the architect of smaller John Lewis stores, it’s not clear if that plan is still on the horizon. Further concessions at Waitrose are a possible way forward.
Sharon White, the group’s chair, has identified buildable housing via Waitrose shops and other properties as a potential future source of income. The group has struck a £500m deal with investment firm Abrdn to build 1,000 rental apartments in three locations. However, some of these sites, such as Ealing, are already being questioned by local people and even the council, suggesting this may not be an easy road to success.
Waitrose is looking for new avenues of growth via partnerships that open up access to new customers and has already teamed up with grocery courier Deliveroo and Dobbies garden centers, but that seems like little beer.