JOHN LEWIS OF HUNGERFORD PLC Statement on Interim results
Chairman, Malcolm Hepworth, released the following statement.
The result for the first half year reflects the loss of consumer confidence in the UK economy during the lead up to Christmas that I highlighted in my recent AGM statement. In particular the decline in sales during the period is attributable almost entirely to reduced customer activity during December and January, with both months being significantly down on budget and the previous year.
This reduction was particularly disappointing as it came on the back of a strong performance during the first quarter which had seen the positive momentum within the business continue to build through year-on-year sales growth in line with that achieved by the business in each of the two previous years.
Our sales cycle means that reported sales are largely driven by purchasing decisions taken by customers several months previous. Therefore whilst it is difficult to be certain we believe the decline was reflective of a more general weakening in consumer confidence at that time. Certainly it coincided with a period of intense speculation over the implications for the UK economy arising from problems within the Eurozone. Inevitably such uncertainty is unhelpful in sectors such as ours, which deal in large discretionary purchase items. Speaking to our customers it is clear this had led some to delay or deferred orders.
Customer activity levels are now beginning to improve but whilst the level of order intake is encouraging we continue to experience difficult trading conditions. Current sales performance is broadly in line with management’s expectations although we expect to be trading below last year levels for the remainder of the year.
The volatility in sales between Q1 and Q2 serves to reinforce the extent to which our business is dependent on the prevailing level of consumer confidence. Although we have limited opportunity to influence this we must nevertheless remain vigilant to any changes and act decisively if the need arises. In January we took the decision to reduce our cost base due to the lower activity levels and this means we are now benefiting from greater efficiency levels within our production facilities.
Against this challenging backdrop it is pleasing to note that all our newer showrooms are showing an increase in sales on last year. In addition our latest showroom in Cirencester continues to attract high levels of customer interest. This supports our central strategy, which remains to expand our retail estate through selective investment in new locations. However, no further sites are currently under active consideration.
Although the wider economic conditions have led to a disappointing financial result for the first half year we must not lose sight that the business has taken significant steps forward in recent years. I remain confident that these will ultimately deliver enhanced shareholder value through creating a business better able to take advantage of the improved economic conditions in due course.