John Lewis to close more stores as Covid crisis wipes out profits

Department store group records £517m loss and does not expect to reopen all stores in April when retail lockdown ends

John Lewis Partnership does not expect to reopen some of its department stores when lockdown ends, after slumping to a £517m loss for 2020.

The staff-owned retailer, which runs 42 department stores and the Waitrose supermarket chain, confirmed it would not be paying a bonus to staff for the first time in 67 years, as chairman, Sharon White, said it was “not out of the crisis” caused by the Covid-19 pandemic.

John Lewis said it was unlikely to pay a bonus again next year either when it forecast the financial results would be even worse, owing to investment in a five-year turnaround plan.

In the year ahead, the group plans to plough £800m into improving stores and upgrading online shopping infrastructure including developing its shopping app for smartphones.

“It’s been a real economic earthquake. We’ve seen decades worth of change in the space of one year,” White said. “Shopping habits have changed irreversibly.”

She said customers were not only moving online, but wanted more convenient local outlets as they expected to work more from home.

The mutual’s first-ever full-year loss comes after £648m of one-off costs relating to the writedown in value of the John Lewis estate amid the shift to online shopping, as well as restructuring and redundancy costs from store closures and head office reorganisation.

White said the group would be holding on to government business rates relief and furlough support worth £190m, which had “helped to keep us running and avoid more severe restructuring”. The group intends to continue claiming business rates relief until June.

She confirmed some John Lewis department stores were not expected to reopen when lockdown measures were lifted in April. Instead there are plans for dozens of John Lewis-branded areas in Waitrose stores around the country and “smaller, more flexible” outlets in local neighbourhoods.

A final decision on the store closures is expected by the end of March after discussions with landlords complete.

The group has set aside £75m to cover restructuring in the year ahead, which is likely to include job losses at closing stores and other operational changes.

White said: “Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store. We are not out of the crisis yet and the economic environment remains extremely uncertain.”

Some industry watchers have suggested the changes could leave John Lewis no different to the likes of Argos – where it is possible to order goods online and pick them up in a store.

Pippa Wicks, the boss of the John Lewis department stores, said staff would continue to use specialist knowledge to offer extra services both on the high street and online where the group now offers virtual personal styling or home advice sessions.

“We are absolutely not the Argos of the middle classes,” she said.

White plans to introduce new lower-priced products when its department stores reopen in a bid to improve value for money under plans to ditch its “never knowingly undersold” pricing pledge which has been in place since 1925.

Sales at the John Lewis chain slipped just 4% to just over £4bn and operating profits were down by about 25% as online sales soared 73%, almost offsetting 20 weeks of store closures in the year. Online now accounts for three-quarters of the department store’s trade, up from 42% before the pandemic.

Sales were helped by a rush for technology to support home working and schooling. However, fashion and cosmetics sales dived as the need for workwear and outfits for social occasions slumped under lockdown restrictions.

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At Waitrose, sales jumped 10% to £7.6bn and operating profits rose 8% to £1.1bn. The supermarket also experienced a big switch to online trading which now accounts for 20% of sales, up from 5% before the pandemic.

White said she expected most of the online shift to be permanent but that the group’s stores would remain an important part of its business.

“The high street is changing and our place on it is changing with it,” she said.

Before the one-off writedowns, group profits rose to £131m in the year to 30 January from £70m a year before, underpinned by the business rates support.

White said the outcome was better than her fears of a small loss as trading had been stronger than expected in the second half of the year, with consumers switching to online shopping during the national lockdowns.

Nick Bubb, an independent retail analyst, expressed surprise that the John Lewis Partnership (JLP) had neither paid out a bonus to staff nor returned the Waitrose business rates relief, given what he described as a “decent” underlying performance. “With profits emerging so much better than expected, JLP should have changed its stance,” he said.

Contributor

Sarah Butler

The GuardianTramp

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