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John Lewis sees Christmas splurge, then restraint before election

Published 11/11/2014, 16:20
Updated 11/11/2014, 16:30
John Lewis sees Christmas splurge, then restraint before election
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By James Davey

LONDON (Reuters) - Britain's biggest department store John Lewis (JLP.UL) expects consumers to splash out again this Christmas before the spending spree sputters out ahead of a general election in May.

John Lewis posted record Christmas sales in 2013 and followed that up with a strong performance through 2014, driven in part by a revitalised housing market. Although it expects to continue to outperform rivals in 2015 it is taking a more cautious view on prospects.

"With next year being an election year I think that ... come mid-January everybody's just going to re-trench and say 'OK I'm going to batten down the hatches until I can figure out what's happening this year'," retail director Andrew Murphy told Reuters.

The economy is shaping up to be the major policy area in the run up to the general election. The opposition Labour party says most Britons are not feeling the benefit of the recovery, with wage growth still very weak.

"I'm not talking about being pushed back into negative territory or anything approaching recession but I can't imagine anybody's going to be forecasting that the retail market takes off fast in January and February," said Murphy.

He said that while consumer confidence had undoubtedly improved this year John Lewis was seeing "a very patchy translation of that into actual spending behaviour."

John Lewis, whose worker co-ownership model has been lauded by Prime Minister David Cameron, has been the star performer of Britain's retail sector in recent years.

Its generally more affluent customers were less hurt by the economic downturn and it has a bias to the more prosperous south east of England. A big push online, improvements to stores, products, service, promotions and marketing, have also chimed with shoppers.

In September it posted a 62 percent rise in first half operating profit to 56.3 million pounds ($89.31 million) on sales up 9.4 percent to 1.87 billion pounds. Sales are up 8.1 percent in the first 14 weeks of its second half.

Murphy said if Britain's unseasonably mild autumn/winter continued for another two weeks clothing retailers will cut prices "even more dramatically" than they already have, hurting profit margins.

"Whether it's the weather or some other stimulus the majority of UK retailers have got very little adherence now to the old rules about how you make sure you get your margin."

(Reporting by James Davey; editing by Susan Thomas)

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