Waitrose profits hit by investment and deflation

By Arabella Mileham

Published: 12 March, 2015

Waitrose saw operating profits fall 23.4%, on the back of increased investment in operations and amid a deflationary market.

Waitrose saw operating profits fall 23.4%, on the back of increased investment in operations and amid a deflationary market

The upmarket retailer posted strong sales performances in unaudited results to the end of January 2015, with sales up 6.5% to £6,508.9m and like-for-like sales also rising 1.4%. But operating profit tumbled to £237.4m compared to £310m in the same period last year, hit by a combination of "significantly" higher investments, the impact of property impairments and "onerous" leases, and trading in a highly competitive and deflationary market. This was estimated to cost the retailer around £26m, with further impact felt by thee planned closure of its Acton online fulfilment centre, it said.

Investment in Waitrose grew 35% to £388.5m during 2014, including new IT infrastructure the acquisition of six former Co-operative stores. The retailer's new national distribution centre is due to open in the summer.

Sir Charlie Mayfield, chairman of parent company John Lewis Partnership, said returns from grocery were expected to be "materially lower" of a period of time despite an increase in market share to 5.4%.

"Waitrose's value perception has improved significantly over the last few years and we will continue to defend that hard won position during this period of change," he said. "Our strategy of investing to create the modern Waitrose has supported us in increasing sales, growing customer transactions and gaining market share."

The company flagged up a 6% rise in customers numbers, with transactions rising an average of 400,000 a week. Online grocery benefitted from investment, it said, with the launch of its standalone wine site Waitrose Cellar in May and the introduction of click and collect on wine in October. Overall online sales growing 31.2%, with the value of online orders also up 5%. Own brand sales also increased, up 5.6%.

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