LONDON British upmarket grocer Waitrose has scaled back plans for new stores but will add more cafes and bakeries to existing shops, while owner John Lewis shifts its investment into logistics and technology as online shopping booms.
Waitrose Managing Director Rob Collins told reporters on a results conference call on Thursday that the group had scrapped plans to open seven new supermarkets in the next two years, although it would still proceed with two new main stores and five convenience shops.
That resulted in an exceptional charge of 25 million pounds ($33 million) that pushed John Lewis's first-half pretax profit down 74.6 percent to 56.9 million pounds. Excluding the charge, pretax profit fell 14.7 percent to 81.9 million pounds.
Other British supermarkets such as Tesco (TSCO.L) and Sainsbury's (SBRY.L) have also made property writedowns as they close some stores and halt plans to open others as consumers switch from big weekly shops at out-of-town hypermarkets to buying more online and locally.
However, John Lewis Chairman Charlie Mayfield said he did not expect Britain's vote to leave the European Union to affect sales in the second half of the year, although the weaker pound could eventually cause some inflationary pressures.
Collins, who took over in April, said an important part of the Waitrose strategy in future would be the "food-to-go" market, which research group IGD has predicted will grow 6.8 percent in 2016 to 16.1 billion pounds.
Waitrose "hospitality" sales from more than 200 in-store cafes, bakeries, wine and juice bars rose 7.1 percent in the first half and Collins said those offerings brought a significant "halo" effect to the grocery business.
Waitrose's premium offering and loyal middle class clientele has helped it gain market share as other British supermarkets have lost out to the rise of discounters Aldi and Lidl, which has pushed prices down across the sector.
However, Aldi has now overtaken Waitrose as Britain's sixth-biggest grocer and its market share has slipped slightly in recent months to 5.1 percent.
For the first six weeks of the second half from Aug. 1, Waitrose's gross sales rose a like-for-like 1.4 percent, improving from a 1 percent fall in the first half, when sales online rose 4.3 percent to account for just over 5 percent of sales.
Collins said the improvement was partly due to the launch in
May of the new Waitrose 1 premium range, which grouped new lines with existing own-brand ranges, helping sales jump 19.4 percent.
Facing stiff competition from online rivals such as Amazon (AMZN.O), John Lewis saw like-for-like sales growth slow at its department stores unit to 0.7 percent in the first six weeks of the second half from 3.1 percent in the first half.
As its ecommerce booms, John Lewis said investment in technology and distribution now represented 55 percent of total capital spending, up from 48 percent last year.
($1 = 0.7553 pounds)
(Reporting by Emma Thomasson; Editing by Susan Thomas, Greg Mahlich)