Plunging sterling could increase costs
Pound sterling (GBP) weakness is set to become a problem for John Lewis, according to its Management Director, Andy Street.
Uncertainty preceding and following the UK’s EU Referendum result heightened volatility in sterling markets, with the pound plunging to 31-year lows against the US dollar (USD) in the aftermath of the vote.
“The big issue is the decline in exchange rates,” said Street. “We hedged this year but the issue is next year; it will have an effect. If inflation gets into the value chain, it will feed through.”
His comments were followed by consumer confidence data, which saw its largest fall in 21 years.
“Inflation would increase prices presented to consumers, and discourage sales,” said Carl Hasty, Director of foreign exchange experts, Smart Currency Business. “Retail businesses are beset with challenges stemming from pound sterling weakness. This means that – like John Lewis – they need to mitigate currency risk, in order to minimise losses stemming from unfavourable currency exchange rates.”
Street also called for more certainty on the UK’s trade relationships, as well as the fate of Europeans currently living and working in the UK.
Despite the challenges that it faces, John Lewis has announced its goal to expand its own-brand Home business to £1 billion in annual revenue by 2020. It will also work towards expanding its relationship with external brands.