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The John Lewis Partnership has rebounded into annual profit on strong sales and profit growth at Waitrose, but it will not pay a staff bonus again for the year.

Following a “challenging” set of results in 2022/23, profit before tax and exceptional items for JLP’s year to January 27 2024 was £42m, a £120m improvement on the prior year loss of £78m.

The group said this jump was achieved through a combination of sales growth, gross margin rate improvement and sustainable productivity improvements.

Overall profit before tax was £56m, up from a loss of £234m in 2022/23.

Total sales reached £12.4bn, up by £176m (1%) from a year earlier, while total revenue was up 2% to £10.8bn.

Waitrose sales rose 5% to £7.7bn and a record number of customers chose to shop with Waitrose. For the full year, volume was down 1.5% and average item price up by 6.6%.

Waitrose said it had now delivered eight consecutive quarters of growth in customer numbers – with customer numbers up 8.1% to 15.0m. It invested £100m in lower prices and launched innovative products like the Japan Menyu range.

John Lewis sales were £4.8bn, down 4%. Sales in fashion, including beauty, were up on the year while it saw weaker sales in home and technology.

Waitrose trading operating profit of £1,064m improved by £170m as sales growth, combined with strong delivery of productivity programmes across stores, cost of goods and supply chain underpinned this improvement

John Lewis’ profits of £689m were £13m better year on year as gross margins driven by efficiency savings across supply chain and stores.

Overall group gross margin rate increased by 0.6 percentage points this year.

The group said this improved performance would allow it to accelerate investment, with £542m planned this year, up from £312m in 2023/24, in pay for its staff with its highest ever pay investment amounting to £116m.

However, “after careful consideration” it said investment in pay needs and improving its business “must continue to take priority over paying a bonus”. Consequently, there will be no Partnership Bonus paid this year.

In 2024/25, the group expects further improvement in key financial performance measures of profit before tax, partnership bonus and exceptional items, debt ratio and operating profit as a percentage of sales.

Sharon White, chairman of the John Lewis Partnership, said: “We have made significant progress in the last year to return the business to profitability and delivered results that allow us to increase investment in our retail businesses; we expect profits to grow further this year.

“This shows our plan is working, while we know there’s much more to do. Our improved performance has been supported by our customers’ love for both brands, with more people choosing to shop with us than ever before, and our partners’ commitment to delivering excellent customer service.

“This year we will unashamedly focus on investing back into our retail businesses for our customers, including opening new Waitrose shops and continuing to modernise our brand offering in John Lewis, while prioritising pay for our partners.”

CEO Nish Kankiwala added: “I’m grateful for the hard work and dedication of our partners in delivering our return to profit while growing our customer numbers, accelerating the pace of transformation and driving significant improvements in productivity.

“It’s great to see an increasing number of customers embrace our partner-led service and our unique credentials for quality and value, while we deliver exciting new innovations in both Waitrose and John Lewis. I’m very confident in the next phase of our refreshed plan, which will focus on delighting our retail customers, offering excellent service delivered by our partners.”

Morning update

Also this morning, Deliveroo has posted its financial results for the year to 31 December and delivered growth in EBITDA ahead of guidance.

The delivery group experienced a “resilient year of growth given macroeconomic conditions”, with gross profit up 13% and revenue and GTV (gross transaction value) up 3% (2% and 3%, respectively at constant currency).

Its growth trend improved in the second half with GTV up 5% year-on-year in the second half and orders recovering through the year to be flat year-on-year in Q4.

Notably the group made significant progress on profitability, with adjusted EBITDA of £85m from a loss of £45m in the previous year.

Profit improvement levers included efficiencies in the delivery network, optimisation of marketing spend, overheads savings and a higher advertising contribution.

The group’s headline loss for the period reduced by £262m to £32m.

Deliveroo pledged continued investment and innovation in consumer value proposition (CVP), with enhanced selection and in-app experience, premium delivery, top-up grocery orders and launch of a retail proposition.

Deliveroo said it had multiple opportunities for growth including further enhancing CVP (selection, price/value, Deliveroo Plus and delivery experience) and new verticals and use cases (retail and mid-sized grocery baskets).

Strong levers for profitability and cash flow including reducing rider wait time and smarter order stacking, increased marketing efficiency, and greater automation to drive operating leverage as we scale.

In the medium term it is targeting a mid-teens percentage growth per annum in constant currency GTV, while it is aiming for an adjusted EBITDA margin of 4% by 2026.

For 2024 GTV growth (in constant currency) anticipated to be in the range of 5-9 as growth is expected to improve through the year.

Adjusted EBITDA expected to be in the range of £110m-£130m.

Will Shu, founder and CEO of Deliveroo, said: “2023 was a good year for Deliveroo and I am proud of what we have delivered financially, operationally and for our consumers. Our focus on service and value for money continues to build consumer trust, which are fundamental to unlocking future growth in this industry.

“Alongside this, our restaurant and grocery businesses are performing well, we launched our retail offering, Deliveroo Shopping, and we are scaling our advertising business. Building on the strong progress we made in 2023, I’m excited about the further opportunities ahead.

“We have clear strategic priorities and initiatives in place to achieve our medium-term targets, and I am confident in our ability to deliver continued profitable growth.”

Deliveroo shares are up 3.3% to 118.3p on the news.

On the markets this morning, the FTSE 100 has edged a few points up to 7,776pts.

Along with Deliveroo, risers include Naked Wines, up 2.4% to 62.2p, Domino’s Pizza Group, up 1.7% to 369p and Diageo, up 1.5% to 2,954.5p.

Fallers include Science in Sport, down 3.2% to 15p, Supermarket income REIT, down 1.3% to 75p and Haleon, down 1.3% to 326.8p.

Yesterday in the City

The FTSE 100 improved by 0.3% to 7,772.2pts yesterday.

Risers included Just Eat, up 4.1% to 1,181p, Glanbia, up 3.4% to €17.80, Pets at Home, up 2.7% to 272.6p, Domino’s Pizza Group, up 2.2% to 362.8p, McBride, up 1.9% to 97.6p and THG, up 1.8% to 61.1p.

The day’s fallers included Naked Wines, down 2% to 62.7p, Deliveroo, down 1.7% to 114.5p, Marks & Spencer, down 1.5% to 247.1p, B&M European Value Retail, down 1.2% to 551.4p and Fever-Tree Drinks, down 1.2% to 1,190p