Upbeat John Lewis taking market share from rivals

The employee-owned partnership, which has 39 John Lewis shops and 294 Waitrose supermarkets, reported £4.7bn in sales in the six months to July 27, an increase of seven per cent despite comparisons with strong trading last summer.

Underlying profits were four per cent higher at £115.8m, although a payment of £40m to staff following the miscalculation of holiday pay over the last seven years meant bottom-line profits fell 38.5 per cent to £68.5m.

Partnership chairman Sir Charlie Mayfield said that John Lewis and Waitrose had grown sales “well ahead” of their respective markets during a strong first half.

“Looking ahead, I’m encouraged by progress this year and am confident of the plans we have in place for Christmas,” he said.

“Despite a strong second half last year, both during the Olympics and at Christmas, I expect us to trade positively in the second half.”

In the first six weeks of the second half, John Lewis sales rose by 5.1 per cent on a like-for-like basis, while Waitrose was 4.4 per cent higher.

The Partnership said Waitrose had outperformed the sector for more than four years and that its market share now stands at 4.9 per cent – 0.3 per cent higher than a year ago.

Its sales in the first half were up by 7.8 per cent to £3bn, or 6.9 per cent on a like-for-like sales basis, as operating profits climbed 12.8 per cent to £160.2m.

Department store profits rose 10 per cent to £50.1m following sales growth of 6.6 per cent to £1.71bn, an increase of 5.1 per cent on a same-store basis.

Investment costs of £53.2m, including in-store refurbishments and IT, meant the division’s overall profits fell 24 per cent to £34.7m.

In March, the business announced that employees would receive 17 per cent of their salary as part of an annual bonus, equivalent to nearly nine weeks’ pay.

The business created a net figure of 800 new jobs, taking its headcount to around 85,500 staff.

The holiday pay miscalculation was spotted by a John Lewis employee who uncovered a seven-year salary underpayment to staff that cost the retailer £40m to fix.

The group said the intervention of the staff member, who performs a “customer facing” role, combined with a review of its holiday pay policy brought the expensive blunder to light.

The error relates to employees who receive certain additions to pay, such as premiums for working on Sundays or bank holidays, not being paid correctly under the UK’s Working Time Regulations legislation. The employee “joined from another company where they would have had similar supplements in their holiday pay and asked the question”, said a spokesman for John Lewis.

“This review was happening anyway. The two came together and led to the quick response,” he said.

John Lewis is Britain’s largest example of co-ownership where all 85,500 staff are partners in the business, so an admission it underpaid its employees could be seen as embarrassing.

“We’re being very open and saying we didn’t get this right and we’re doing everything we can to correct it, and we’re paying back as far as we can with the data we’ve got,” said the spokesman.

Last month 69,000 partners received additional one-off payments reflecting amounts due to them backdated to 2006.

Individual payments varied according to pay and shift patterns, with more than half of the recipients receiving under £120.

John Lewis accounted for the £40m, which included repayments plus associated pension, National Insurance and administration costs, in its half-year results published yesterday.

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