BBC News Magazine

Page last updated at 16:44 GMT, Tuesday, 5 January 2010

Why are John Lewis's results so important?

The Magazine answers...

Much always seems to be made of John Lewis's trading figures, but why is this store chain considered so important?

Crowds outside John Lewis
John Lewis's structure allows quick and detailed results

For many it is simply an ever-so-slightly well-to-do department store chain, with a large haberdashery section, that always boasted it was "never knowingly undersold".

Yet, particularly at Christmas, John Lewis's trading results are sometimes seized upon almost as though the economic fate of the nation depends on them.

The fact that the chain had a bumper Christmas, with its 29 department stores topping £100m sales in four of the five weeks to 2 January, will be taken as evidence that the High Street is healthier than previously thought. Sales at the 222 supermarkets of the Waitrose sister chain were up 20% in Christmas week.

But the reason for the prominence given to John Lewis results is at least in part because of the way the John Lewis Partnership - which owns John Lewis and Waitrose - deals with its results.

It is a "partnership", owned by its 69,000 permanent staff, and therefore different from most other public limited companies.

It gives weekly as opposed to just quarterly results
It is also more transparent about how sales break down
It gives insight into middle class shopping habits

In the case of a typical, stock exchange-quoted plc, full results are usually only reported quarterly. But John Lewis chooses to report results on a weekly basis, giving an almost live feed to information-hungry analysts.

It all goes back to 1929 when the first framework for the partnership was established.

"It was felt that the workers should understand how trade was doing on a weekly basis," says a spokesman for the John Lewis Partnership.

As such weekly results were included in the gazette, mainly read by staff but also available outside. Today the results are released on the company's website at the end of every week.

"They are a barometer or bell-wether for the retail sector for a number of reasons," says Bryan Roberts, research director at analysts Planet Retail.

"There is a massive amount of transparency in terms of how they report. There is a lot to say on how different categories are reporting."

Some plcs might only give limited information in their quarterly results, but John Lewis and Waitrose give a great deal of detail. Analysts can find out how sales have changed at each individual department store, and that Waitrose was selling 27% more geese in the week to 19 December. This level of detail can also be useful to journalists looking for specific trends.

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The most significant retailer, in terms of sheer size, is Tesco. But the detailed information that analysts want might not always be available.

Analysts also like the size and spread of the John Lewis chain.

"They are present in most of the UK. A lot of competitors do have regional skews," says Mr Roberts. But the chain has no store in Northern Ireland and has a much more limited footprint in Wales and the North East of England as compared with the South East of England. And there are other limitations.

"It is still a middle class retailer," says Mr Roberts. This is significant during a downturn when "discounters" and budget chains may do well. Analysts might also find themselves reaching for Poundland results, Mr Roberts suggests.

Woman with John Lewis bags
At Christmas, retail analysis is much in demand

The focus on John Lewis is particularly intense at Christmas because of how crucial the period is to the retail sector. Many firms make most of their profits in the final quarter of the calendar year, with December vital. As such analysts wait with bated breath for results over the festive period.

An overview of how the whole of the retail sector did over the period will be available from the British Retail Consortium on 12 January.

And ultimately, although there might be a skew towards the spending habits of the more affluent, what the middle classes do is interesting to analysts and journalists.

"John Lewis and M&S are quite symptomatic of what Middle England is doing," says Mr Roberts.

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