John Lewis must ‘up its game’ as profits slump
Fashion boss Philip Day steps up investment in ‘heritage’ British brands
JOHN Lewis is on track to deliver a profit slump after the exit of its department store boss and dismal trading figures, City sources say.
The department store is set to report just £30million profit in the year to the end of January before any bonus is handed to staff. That would be a quarter of the profit reported last year, according to retail analyst Nick Bubb. He said the fall at the retailer, which has a £4billion-a-year turnover, would mean the group bonus would be ‘mostly blown away’.
John Lewis’s sister chain Waitrose, which made an operating profit of £200million last year, is expected to deliver a more ‘solid’ performance, Bubb added.
However, another analyst, Richard Hyman, said the departure of department store boss Paula Nickolds, Waitrose managing director Rob
Collins and chairman Sir Charlie Mayfield to make way for his replacement Sharon White, a former chief executive at Ofcom, leaves a power vacuum at the firm.
‘John Lewis Partnership faces the most challenging moment in its history. The incoming leader, by definition the most senior executive in the company, has no commercial background at all, let alone a retail one. She would and should have relied on Collins and Nickolds to accelerate her learning about the business and the industry.
‘The clock is ticking. It is clear that in 2020 trading will be further squeezed. Farreaching decisions need to be made now and they must be right. Retail is unforgiving. No brand is owed a living. The partnership needs to up its game, and quick.’
RAG TRADE billionaire Philip Day is stepping up investment in his stable of British ‘heritage’ brands with flash new West End headquarters and a flagship store for his prized Jaeger fashion chain.
Day is understood to have snapped up a 30,000 square foot building in Marylebone, West London, that will house office staff for his brands Austin Reed, Jaeger and Viyella.
The labels form part of a group of brands owned by Day which also includes Peacocks, Edinburgh Woollen Mill and Country Casuals. The group employs 27,000 staff and has 1,200 shops and concessions.
But the fashion mogul has identified the brands destined for the new office as a key investment opportunity. Day, 54, who lists his residence as Switzerland and has handed an essential role running the Jaeger chain to his daughter Lauren, is understood to have been opening a Jaeger store every month and wants to double the chain to 30 town centre shops.
A spokesman for Day’s Edinburgh Woollen Mill group said the brands had ‘lost their way’ before being rescued from collapse.
‘We are on a mission to bring back British heritage brands to the UK high street. We want to restore these proud British brands to their former glory, not only in the UK but internationally too,’ the spokesman added. He declined to reveal details of the new operations centre. But sources said it will include the main London store for Jaeger on its ground floor and concessions to show off the latest Austin Reed and Viyella ranges.
The new push emerges after The British Retail Consortium said the high street has suffered its worst year for 25 years. Last week’s grim news included a raft of dire trading updates from across the sector and culminated with the sudden departure of John Lewis boss Paula Nickolds.
But Day, who has been described as ‘the new king of the high street’, is not alone among mega-rich retail barons snapping up ailing high street chains in the hope that better days may be around the corner.
Sports Direct founder Mike Ashley, who described himself as the ‘saviour’ of Britain’s high streets, bought House of Fraser in 2017 and has long stalked its larger rival Debenhams in the hope he can seize the chain on the cheap.
Meanwhile, the founder and executive chairman of online fashion chain Boohoo, Mahmud Kamani, is also waiting in the wings.
Kamani’s family, which includes son Umar who runs Boohoo’s PrettyLittleThing.com site, is reportedly worth £1.2billion. Sources say the rapid growth of the group will mean that figure is highly conservative. Boohoo hoovered up the fallen Karen Millen and Coast brands for just £18 million last year.
Meanwhile, Day scrapped his dividend from Edinburgh Woollen Mill last year amid speculation he may be lining up more acquisitions.
But one senior retail executive said buying up faded chains, while cheap, was not a recipe for success.
He added: ‘The bet is that the high street is nearing the bottom. That online is going to plateau. If you can buy things on the cheap, renegotiate rents and sort out the suppliers then great, but you need a bit of vision or you might just end up flogging a dead horse.’
He added there was always a risk that ‘ruthlessly stripping’ assets and brands ‘could backfire’.
Day, who grew up on a council estate in Stockport, spends much of his time in the Middle East and mainland Europe and has a castle in Carlisle. He cut his teeth as managing director of upmarket men’s tailoring label Aquascutum in the 1990s and is said to regard his growing stable of upmarket British brands as a return to his roots. He also owns suit brands Berwin & Berwin, Baumler and a clutch of womenswear brands familiar with department store shoppers including Jacques Vert, Dash, Eastex and Windsmoor.
Directors at Day’s group have previously talked about having as many as 50 shops under the Austin Reed brand, which Day once said had been ‘horrifically’ mismanaged before he bought it. Any such strategy is understood to be some way off with the group focusing on growing its 49 concession partners and selling online in the short term.
It has also launched a made-tomeasure service for Austin Reed through 22 partners and signed a deal with premium wool supplier El Escorial, whose other customers include Louis Vuitton and Chanel, to make the £2,500 fitted suits.
The spokesman said: ‘Rebuilding iconic brands takes time and there are no short cuts. We know that it will be a long journey. We know that it is necessary to take this at a measured but focused pace. We are not in this for short-term wins – we see this as a long-term mission that requires strategy and investment.
‘We believe these British brands partly lost their way because they became dependent on an unsustainable discount-led marketing strategy. Now the emphasis is on quality.’