Strong online performance and COVID-19 hampers Waitrose profits, says GlobalData

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Following today’s release of Waitrose’s figures for H1 FY2021/22; Kunaal Shah, associate retail analyst at GlobalData, a leading data and analytics company, offers his view: “Waitrose has reported a robust set of H1 results, with revenue increasing 2.2% on last year to reach £3,515m, and two-year growth of 10.7%. However, operating profit dropped £61m to £525m, though just a £5m fall on 2019/20.  The decline has been driven primarily by the pandemic, with COVID-related costs and the growth of Waitrose online the biggest factors.

“Since online now accounts for 17% of sales, compared to 11% a year ago and just 5% before the pandemic, Waitrose is making essential changes to improve channel profitability.  The introduction of a £3 delivery charge for all orders will help, while investment in new stock management systems and other efficiencies should prevent further margin erosion. To strengthen its reach online further, the two-year partnership with Deliveroo supports JLP’s strategy of working with third-party brands to offer customers more products and services. With the growth of rapid delivery services accelerating in the last year, this partnership is already proving fruitful, with sales hitting £1m a week following the rollout to 150 shops from 40. According to GlobalData Retail’s July consumer survey, 9.8% of consumers who used rapid delivery services did so purely for groceries.  

“Despite a strong online performance, customers are making their way back into stores, with online penetration 3ppts lower than in March this year. The decision to extend the number of Waitrose stores with dedicated John Lewis spaces from 17 to 40 will give customers more reason to visit stores and shop across both channels. Moreover, the impending roll out of the ANYDAY range to 120 Waitrose stores should help stimulate instore footfall and increase average basket size.”