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John Lewis Partnership plc annual report and accounts 2012

Business review Business and strategy

Purpose of the Partnership

 The Partnership’s reputation is founded on the uniqueness of our ownership structure and our commercial success. As set out in Principle 1 of our Constitution our ultimate purpose is the happiness of all our members, through their worthwhile and satisfying employment in a successful business, with success measured by our ability to sustain and to enhance our position both as an outstanding retailer and a thriving example of employee ownership. We believe our model, where commercial success is a driving force but where the needs of Customers, Partners, and long-term financial ambitions are balanced, represents a sustainable, compassionate and fairer form of capitalism and a better way to do business.

Strategic development – background The Partnership owns two of the strongest retail brands in the UK. Waitrose is renowned for the freshness, quality, safety and provenance of its food combined with the expertise and service of a specialist shop while John Lewis’ reputation is built on a strong product range and excellent service. Neither Waitrose nor John Lewis depends on dominant market share but on distinctive positioning which secures an exceptional degree of loyalty from customers. That loyalty has been built on customers’ trust and confidence in our sourcing, pricing and quality standards and by selling our products impartially with consistently exceptional service. It has been reinforced by recognition of our long-held desire to act responsibly and to minimise our environmental impact. The Partnership is uniquely placed to do this because our social, ethical and environmental values are ingrained in our culture, and we consistently demonstrate this through our commitment to the communities we serve.

2011 has proven to be a very challenging year for all parts of the UK economy, filtering through to a weakened consumer outlook. Rising unemployment, subdued wage settlements and persistent levels of inflation have continued to undermine consumer confidence. We expect 2012 to continue to be difficult, in line with many external commentators, with a continuation of the negative factors impacting consumers and exerting pressure on household spending, and against the backdrop of an uncertain Eurozone. However, the Partnership retains a long term outlook and we remain committed to providing a distinctive offer and experience to our customers which builds upon their trust and loyalty.

Strategic initiatives To reflect the changing external economic and retail landscape, and the ambitions of the Partnership, we have refreshed our strategic intent during the year. To ensure we continue to deliver against the Partnership’s ultimate purpose, and to emphasise our belief that our model is a better way of doing business, we have developed three key strategic aims. Going forward everything we do will be aligned with the intention to either unlock the potential of our Partners, to increase the market potential for our brands or to grow our business in an efficient manner.

Despite the tough market conditions both Waitrose and John Lewis traded well through 2011, outperforming their respective markets, although progress in the non-food sector was particularly hard fought. In response to changing customer needs the investments we made in value have been especially important. In Waitrose, the continued success of the essential range, the Brand Price Match initiative and promotional pricing have reminded customers of our price/quality relationship. Likewise, John Lewis has continued to emphasise the value within its ranges, which when combined with widely acclaimed advertising and the commitment to remain Never Knowingly Undersold have given customers a reason to return to us.

We have not allowed economic uncertainty to deflect us and have taken the important decision to reorganise our business in ways which better support the multi-channel business we are today. We are currently managing substantial reorganisations to ensure that the Partnership remains competitive and that our Partners remain at the heart of our service offering for many years to come.

We recognise there remain new opportunities to develop our brands. Within the UK, new stores have been opened for both brands with an emphasis on exciting new formats such as the smaller footprint John Lewis ‘at home’ and Waitrose convenience. Additionally we have taken our brands to new markets through the John Lewis international website and the expansion of theWaitrose export business. We continue to experience strong growth from our online operations as customers increasingly embrace a multi-channel approach to retail, and we will continue to invest in improving the ease with which our customers can interact with us through improved web and mobile presence and initiatives such as Click & collect.

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