Waitrose has ‘turned the dial’ on recent struggles, after ‘transformed’ annual results

Waitrose has “turned the dial” on its recent struggles, according to executive director James Bailey, who today hailed the supermarket’s “transformed” performance for its role in the John Lewis Partnership’s tripling of annual profits.

Sales at the high-end grocer grew 4.4% to £8bn in the 52 weeks to 25 January. Volumes were up 2.6% as it attracted more customers back to its shops. Improvement in the way the supermarket works with its suppliers, as well as investments into availability and price, had helped Waitrose nearly double profit margins, back to 3%, it said.

“We’re winning the battle for customers,” Bailey declared, in a buoyant results call. “Fundamentally, it’s our strategy of retailing well and focusing on what makes us different that’s paying off.”

Sales of Waitrose own label lines grew nearly 6% year on year. In a trend also seen at the likes of Tesco and Sainsbury’s, the growth was driven by its premium No.1 range, which has seen sales grow 40% since its relaunch in June last year.

Waitrose doubled the number of product launches during the year, forging new partnerships with Zoe, Ottolenghi, Gymkana and Wildfarmed, all of which were “selling well beyond expectations”, Bailey said.

There had been widespread speculation about Waitrose’s Christmas performance, following reports that it missed its internal sales targets for the period. Bailey said like-for-likes were up 5.3%.

Waitrose’s recent work to improve availability and standards in stores had also borne fruit, Bailey said. It has seen a shake-up of partner hours in stores, as well as a rollout of new stock management systems and headsets. Its store operations were “10% more efficient” as a result, and Waitrose had achieved “its best-ever in-day availability scores”.

Those improvements are yet to play out fully in the Grocer 33, with Waitrose currently scoring 92.2% on average during the first 33 weeks of the current year, up slightly from 92% the year before. The Grocer understands performance was hampered by a data glitch that affected availability in stores at the end of November.

Waitrose was “more competitive now than we have been for a long time” on price, after investing £61m in price cuts last year, Bailey said. 

John Lewis ‘retail basics’ strategy is paying off

The figures are a sign that a decision taken just over a year ago by then JLP chairman Sharon White and outgoing CEO Nish Kankiwala, to rejig their long-term strategy back to one “unashamedly” focused on the retail basics, is beginning to pay off.

While the partnership has set the goal of cutting thousands from its headcount, new chairman Jason Tarry – who has backed the plan – has pledged to plunge a further £600m in “catch up investments” into Waitrose and John Lewis stores and supply chains over the next year as it looks to regain the ground lost to rivals like M&S, Sainsbury’s and Tesco.

Noting there was still work to do, Bailey said the measures were “transforming the profitability of the Waitrose business”.

“It’s a lot of hard work behind the scenes to get the business in good shape to start delivering much better profitable return because that profit then can be reinvested in customers and that’s what we’ve been able to do,” he said.

“Record availability levels, record service levels, investing in price steadily but not as a primary focus, and getting back to things that make us special and different.”

John Lewis partners not paid bonus

On the decision to deprive partners of an annual bonus for the fourth time in five years, Tarry – who was hosting his first call since replacing Sharon White in September – said the business had instead prioritised “closing the gap” on base pay as well as investing in the business.

Last week JLP announced an inflation busting 7% hourly payrise, which could rise to above 9% for partners deemed to have made an “exceptional contribution” to the partnership.

“When you talk to partners, what they want to do is make sure that we’re helping them every month, not just once a year,” Tarry said. He said he was “determined to pay a bonus as soon as we possibly can”.