John Lewis staff bonus at 67-year low as more closures announced

Three Waitrose stores to shut this year, putting about 400 jobs at risk

John Lewis has warned it could have to close stores as the retail group, which also includes the Waitrose supermarket chain, revealed a plunge in profits and cut its annual staff bonus to the lowest level in 67 years.

The store group’s new chairman, Sharon White, who took over last month, also revealed that the John Lewis department store’s famous “never knowingly undersold” price promise is at risk as the group tries to improve its financial performance. The retailer’s profits slumped 23% to £123m. Three years ago it made £360m.

The group’s 80,000 staff, who own the business as a partnership, will receive an annual bonus of just 2% of their salary. All workers, from the chairman to part-time shelf stackers, receive the same percentage payout. It is the lowest bonussince the group skipped the payment in 1953. In 2008, just before the financial crash workers were handed 20%.

John Lewis staff bonus

White said: “We need to reverse our profit decline and return to growth.” She said turning the retailer’s fortunes around “will require a transformation in how we operate” and would take three to five years.

White, an economist by training who was previously head of communications regulator Ofcom, said John Lewis stores and Waitrose supermarkets could be closed, reduced in size or relocated: “We will look at ‘right sizing’ our store estate across both brands through a combination of new formats and new locations, repurposing and space reductions of existing stores, and closures, where necessary.”

Three Waitrose outlets – Helensburgh in Scotland, Four Oaks in Sutton Coldfield and Waterlooville in Hampshire – will shut this year, putting about 400 jobs at risk.

However, she added that new stores could be opened in new locations. A strategic review to consider options is expected to be completed in autumn.

White also indicated that John Lewis’s traditional “never knowingly undersold” price pledgecould be ditched. The department stores have been hurt by the price pledge as struggling rivals such as Debenhams have cut prices to attract shoppers, with John Lewis forced to match them.

White said “fair value would continue to be part of the proposition going forward” but this may take a “more modernised form”.

She insisted there were no plans to ditch employee ownership or to sell either Waitrose or John Lewis. She said the group would not change its ethos of quality products and strong customer servicebut that an increased emphasis on sustainability would be central to the group’s future.

In more profitable years, employees have waited for the bonus announcement at the flagship John Lewis store in central London.
In more profitable years, employees have waited for the bonus announcement at the flagship John Lewis store in central London. Photograph: Andrew Winning/Reuters

Julie Palmer, partner at Begbies Traynor, said: “John Lewis’s fall from grace has been spectacular. Once the envy of the retail industry, the company has suffered dismal trading performances over the past few years, demonstrating that the retail race is so fast that even those seemingly on an unstoppable march one year can be vulnerable the next.”

Operating profits at the department stores slumped 65% to £40m. It was hit hard by weak homeware and electrical sales, investment in IT and an increase in costs including staff pay.

John Lewis profits

They have suffered from the switch to online shopping and lacklustre markets for fashion and homewares. Tough trading conditions helped push rivals Debenhams, House of Fraser and Beales into administration. While Debenhams and House of Fraser have been rescued they continue to discount heavily and to close stores, heaping pressure on John Lewis.

Waitrose’s profits rose by £10m to £213m, boosted by the sale of unwanted stores. Excluding that one-off boost from the property sell-off, profits fell £6m, hit by higher costs including staff pay.

Waitrose is now preparing for the loss of its contract to supply Ocado. From September the online-only grocer will supply Marks & Spencer groceries to its shoppers and Waitrose will try to persuade Ocado shoppers to switch to Waitrose.com instead.

White described the financial results as a “weaker performance than we had hoped for”.

At a staff meeting last month White also raised concerns about botched orders, which meant the group had to pay out £23m to angry customers last year.

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The group said it expected the retail business to remain volatile, as the implications of coronavirus and Brexit emerge, but White said Waitrose and John Lewis had seen an upturn in sales, particularly online, in recent days. She said this suggested shoppers were turning to “trusted brands” amid the uncertainty.

The company said it had plenty of cash to see it through any problems caused by the coronavirus and would be investing in both Waitrose and John Lewis’s online operations to help meet demand.

“There is a lot of opportunity to be grasped this year even with volatility in the wider market,” White said.


Contributor

Sarah Butler

The GuardianTramp

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