In a tale worthy of Schrödinger, sales and profits were both up and down for Waitrose as it announced its half-year results, but if you look hard enough, it’s clear that the retailer’s grocery business is starting to rebound.
Top line gross sales for Waitrose were up 1.1% compared to the year ago period, with revenue reaching £3.18bn. But so-called like-for-like sales for Waitrose were down 1.3%, although mainly as a result of falling inflation. Total volume growth was also up 1.8%.
Its John Lewis department stores saw gross sales up 3%, but profits were down 26% across the entire Partnership.
But margins were hit by restructuring costs, higher pension contributions and a loss of property profits compared to last year.
Trading has however continued to increase and Waitrose, excluding the above items, managed an operating profit before exceptional items of£135.5m – up 0.8% and producing an operating margin of 4.5%, well above most of its rivals.
Waitrose MD Mark Price also pointed out that Morrisons, which released its half-year results on the same morning (10 September), made lower profits than Waitrose despite its revenues being around 2.5 times greater than the up-market retailer.
Price said he did not expect a quick bounce back to high sales and high profitability. “Stability is the key word here,” he told journalists on a conference call. “We are on a slowly improving trajectory – but it is improving.”
He was adamant that the price wars with the big four – which includes discounts to myWaitrose card users and product-matching with Tesco and Sainsbury’s – was not hitting its margins, and evidence from its latest results suggests he is right.
If you look at Waitrose’s revenue outside of exceptional items and the ongoing issues of deflation, sales were still up, if only by a small amount – but in the current grocery market, any gain is a positive.
Clive Black, an analyst at Shore Capital said Waitrose has delivered a “commendable performance” and said it “should continue to out-perform the market with its new stores, strengthened online presence and ongoing innovative approach seemingly pleasing the majority of its customers … we deem this to be a strong trading performance”.
The price wars will not abate anytime soon, but after a tough 2014, Waitrose appears to have found a stronger foothold on the volatile grocery market.
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