Tough on high street as John Lewis sales drop

The employee-owned group said sales in the week to last Saturday were down 0.9 per cent amid an "incredibly challenging" environment.

That followed a 2.2 per cent year-on-year drop in the week to January 22.

Just four of its 29 department stores open for more than a year showed sales growth – Cambridge, Trafford, Glasgow and Peter Jones in London – while its Sheffield store recorded an 11 per cent sales slide.

John Lewis sales excluding VAT were down 3.1 per cent for the week to last Saturday. This followed a 4.4 per cent drop in the previous seven days.

Retailers have been warned to expect a dire 2011, as the VAT sales tax increase, crumbling consumer confidence, public sector job cuts and soaring inflation take hold.

But despite its recent declining sales trend, the group insisted it is still positive for this year.

"The year ahead promises to be even more testing, but we are budgeting for growth," said retail director Andrew Murphy.

Fashion sales were up 1.4 per cent with home sales 0.3 per cent stronger and electricals and home technology down by 5.1 per cent.

"Electricals trade was subdued in televisions but held up elsewhere: the Kindle continues to be an object of desire, computing made a solid rise and white goods made a real show of strength for the final trading week," added Mr Murphy.

Analysts said the latest figures were significant because they were the first in several weeks not to have been distorted by the weather.

The online business grew sales by 18.4 per cent and Matthew McEachran, an analyst at Singer Capital Markets, said this suggested that the average store experienced a like-for-like sales decline of around 7.5 per cent.

Howard Archer, chief UK economist at IHS Global Insight, said the latest figures reinforce suspicions consumers will be very cautious in their spending in 2011 in the face of serious constraints.

"A second successive weekly year-on-year fall in John Lewis sales heightens concerns over the outlook for consumer spending," said Dr Archer.

"The slowdown in John Lewis sales is particularly notable as the company has been clearly out-performing the retail sector as a whole for some time.

"The John Lewis figures suggest that consumers are becoming increasingly less prepared – or less able – to spend as higher inflation (fuelled by January's VAT hike from 17.5 per cent to 20.0 per cent) and muted earnings growth squeezes their purchasing power."

Retail expert Dan Butters, at business advisers Deloitte, recently warned high street retailers face a tough year, with online channels providing a rare bright spot.

"They are going to have their toughest cycle for a generation coming up," he said. "We're not forecasting any material growth for the next two to three years, and possibly a contraction.

"Generally speaking, it will be a period of attrition."

Dr Archer added: "Higher inflation and muted earnings growth is increasingly squeezing purchasing power.

"Meanwhile, unemployment is high and likely to rise further, other elements of the fiscal squeeze will increasingly bite as the year progresses, and debt levels are elevated. On top of this, the weakness of the housing market is not good news for consumer spending."

John Lewis said its sales for the week including VAT were 14.5 per cent higher than two years ago and that all but two of its shops increased trade on a year ago in the company's financial year to the end of January.

Its online business, johnlewis.com, increased sales by 18.4 per cent.

The group's upmarket Waitrose supermarket chain saw sales grow by 6.4 per cent year-on-year in the week to January 29 to 95.62m.

Ambient food saw a 4.6 per cent increase. Chilled, fruit, vegetables and bakery sales surged by 8.6 per cent, and meat, fish, frozen and dairy rose by 3.9 per cent.

Former ybs chief joins board

Yorkshire Building Society's former chief executive is joining the board of John Lewis as a non-executive director.

David Anderson, who headed YBS from 1996 to 2003, joins the employee-owned group along with Baroness Sarah Hogg.

Lady Hogg and Mr Anderson will be appointed to the group's board on Monday.

Lady Hogg is currently chairman of the Financial Reporting Council and senior independent director of BG Group. She is also a lead independent director of HM Treasury.

Mr Anderson is a non-executive director of NFU Mutual Insurance Society, chairman of the think tank Mutuo, and the first chairman of the newly formed Reclaim Fund.

He is a former chief executive of Co-operative Financial Services, part of The Co-operative Group, and in 2008 he led its merger with the Britannia Building Society. He spent 19 years with YBS.

John Lewis chairman Charlie Mayfield said: "Their appointments will bring significant commercial and financial experience to the board as well as a heavyweight external perspective to our decision-making.

"These appointments clearly reflect the positive impact that our first non-executive directors have had upon the Partnership."