As John Lewis profits fall, here is how UK department stores have fared since 2008

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As John Lewis profits fall, here is how UK department stores have fared since 2008

14 September 2018 by Alex Sword

 

With John Lewis this week reporting top-line profits down and House of Fraser still in the midst of a restructuring process that could see several of its stores closing, the UK’s traditional department stores seem to be facing an unprecedented and sustained period of peril.

 

The John Lewis Partnership (JLP) reported top-line profits down by 99 percent on the same time last year, with rising revenues dampened by investment expenditure.

 

Earlier this week, Debenhams saw its share price fall (down 10 percent between 12 and 13 September) after media reports that it was in restructuring discussions with KPMG.

 

The news comes after House of Fraser went into administration in August, with Sports Direct buying the chain out of administration for £90 million on 10 August. Owner Mike Ashley, who has committed to saving 47 of 59 House of Fraser stores, this week repeated his pledge to make the chain into the “Harrods of the high street” as Sports Direct announced it was on track to achieve its expected EBITDA improvements this year.

 

The bad news, especially from John Lewis, has triggered a new wave of concern for the high street. However, analysis by InternetRetailing’s research arm RetailX shows that John Lewis has been far from the worst performer in the department store sector in recent years.

 

The best performers amongst department stores have been Liberty and Fortnum & Mason’s, which saw revenues grow at a compound annual growth rate (CAGR) from 2008 to 2017 of 11.2 percent and 10.6 percent respectively.

 

The next best performers, Harrods and Selfridges, had CAGRs of 9.3 percent and 6.6 percent respectively.

 

John Lewis saw a CAGR of 5.6 percent between 2008 and 2017, putting it roughly in the middle of the pack. Debenhams and House of Fraser saw CAGRs of 2.7 percent and 2.6 percent respectively over the period.

 

Marks & Spencer, meanwhile, saw a negative CAGR of 2 percent over the period.

When benchmarked against Amazon UK’s 19.4 percent CAGR in the same period, none of the figures seem hugely encouraging.

 

Thomas Andersson, Senior Analyst at RetailX said: “The department store has been caught in a pincer movement by online and offline rivals. On the one hand, online shops such as Amazon now provide a broad range of products from a wide variety of different brands. On the other hand, they face the challenge of the

 

“Adapting to face these two threats is the next big challenge for the sector. A push on customer experience and journey could be the way that department stores can differentiate themselves.”

 

This certainly seems to be the plan for John Lewis, which said in June that it planned to invest between £400m and £500m a year in customer experience across channels in coming years, at the possible expense of profits. It has commented that this is “crucial to [its] long-term success, despite near-term pressures on profitability.”

 

Online grocer Ocado’s chief technology officer Paul Clarke commented this week at the Tech. conference that the retail industry needs to embrace innovation. He cited the example of King Canute, an 11th century English and Danish king widely known for a story in which he demonstrated to courtiers his inability to change the course of the tide.

 

Image credit: John Lewis

Original source: InternetRetailing

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