Upmarket British retailer John Lewis reported piling losses on Thursday.
What does this mean?
When the British middle classes collapse on the sofa after a long day of tennis and farmer’s markets, there’s a strong chance that piece of velvety furniture came from one particular shop: John Lewis. But these days, even well-heeled folk are cutting costs, and that’s driving them to cheaper fashion and homeware stores, and even – good heavens – to discount grocers. To be fair, the retailer didn’t do itself any favors: competitors stole a march on its upmarket supermarket Waitrose, which was snail-slow in capping grocery prices. That meant that 2022’s overall sales came in lower than the year before – and with inflation adding $200 million to costs, the chain ultimately lost over $280 million.
Why should I care?
The bigger picture: Losing Money 101.
Take note, CEOs: John Lewis has just delivered a masterclass on how not to do business. In choppy times like these, companies should be playing to their strengths, but John Lewis is making forays into housing and expanding its financial services offerings – distraction projects, which could still go either way. Then there’s the issue of cost-cutting: John Lewis just announced that it’s probably going to shed even more workers, which will further hit its once-renowned customer service. That won’t put a smile on the faces of high-earning Pippas and Hugos, who’ll buy their organic pâté somewhere else, thank you very much.
Zooming out: Prepare for worse.
As if life wasn't hard enough for UK consumers, a think tank predicted this week that the coming years will see the country's tax burden jump to its highest level in 75 years. See, while the government hasn’t announced any income tax hikes, they've cleverly frozen tax thresholds. And with inflation upping salaries, folk are going to be pushed willy-nilly into higher tax brackets, where they’ll wind up paying more – even as their purchasing power declines.
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