John Lewis Partnership plc annual report and accounts 2013

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, “the Partnership’s ultimate purpose is the happiness of all its members, through their worthwhile and satisfying employment in a successful business”. We measure success 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, underpinned by the Never Knowingly Undersold pricing policy. 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.

Strategic initiatives

The ongoing pressure in the UK retail landscape has affirmed our commitment to the strategic aims we set last 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, everything we do will be aligned with the intention to either unlock the potential of our Partners, to capture the market potential for our brands or to grow our business in an efficient manner.

Despite the challenging market conditions both Waitrose and John Lewis traded well through the year, outperforming their respective markets. Decisions taken to continue to invest through the worst of the recession have proved to be the right ones and helped to sustain this market outperformance. In response to changing customer needs, we have made important investments in value and in omni-channel to increase access to our brands. 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 develop 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 time and time again.

We remain committed to maintaining a business model which will support the Partnership in the future. We continue to manage 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 John Lewis store at Exeter, which carries a full assortment in less selling space than a traditional Department Store, and the Little Waitrose convenience stores. Additionally we have taken our brands to new international markets through the John Lewis website and the expansion of the Waitrose 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 which have underpinned our success through 2012/13.

17