The Chair of the John Lewis Partnership, Dame Sharon White has described the last 12 months as “the most challenging in the Partnership’s history” as the Partnership recorded a Loss before tax of £517 million (compared to a Profit before tax of £146 million in the previous year) in results announced this morning.
The very real situation in the shift to online shopping from traditional bricks and mortar stores is laid bare with the stark fact that the John Lewis department stores are now held on the partnerships balance sheet at almost half the value they were before significant write downs. Before the pandemic, the business judged that £6 in every £10 spent online with John Lewis was driven by our shops. That ratio has fallen to £3 in every £10.
It is now five months since the John Lewis Partnership announced plans to radically overhaul the department store and premium supermarket offer with a five-year strategic plan enabling the business to “get closer to customers.” With an aim to “build deeper relationships with its customers” Dame White said: “We’ve seen five years of change in the past five months, and Waitrose and John Lewis have responded with great agility. Our plan means the John Lewis Partnership will thrive for the next century, as it has the last.”
Clearly there was recognition for the need to adapt and evolve the 157-year-old retail business and at speed in the aftermath of the pandemic, which has enforced on/off closures of non-essential retail stores and increased sales online as shoppers have sheltered at home. But John Lewis had challenging results prior to 2020 as reported by The Guardian, two years prior in 2018 announcing a 99% fall in first-half profits as the retailer was pressurised by low-cost competition, forcing the department store to lower prices under their signature “never knowingly undersold” pledge.
The John Lewis Partnership has been criticised for not handing back an estimated £170 million in business rates relief received from the government. Whilst John Lewis department stores are classified as non-essential retail and have had to open and close in line with government directives relating to Covid-19 lockdowns, Waitrose stores have traded throughout with sales reportedly up 8%. Other grocery brands like Asda, Sainsburys and Aldi have all handed back the financial support. The company has confirmed that the intend to keep the support for the time-being.
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“The business rates relief has helped to keep us running and avoid more severe restructuring of the Partnership, which would have put more jobs at risk at a time when the high street is already under pressure. We are not out of the crisis yet and the economic environment remains extremely uncertain. Therefore, our current intention is to accept the business rates relief made available from April to June, but we will keep this under review.”
The Partnership has repaid a £300 million Covid-19 support loan early to HM Treasury and the Bank of England after trading through Black Friday and Christmas was considered better than anticipated.
The partnership was already challenged when it faced into the pandemic and has been closing stores and reviewing other costs with the aim of reducing head office costs by 20%.
“Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store. Regrettably, we do not expect to reopen all our John Lewis shops at the end of lockdown, which will also have implications for our supply chain”. Further announcements on the store closure decisions are expected to be made at the end of March.
The business has announced the aim is to achieve £400 million in profits over the next five years and highlighted this may include expanding financial service offer.
A further development in the turnaround strategy is to open hundreds of mini John Lewis stores in Waitrose supermarkets, which would enhance the brand reach beyond its 42 department stores.
Dame Sharon White signed off the results announcement with an acknowledgment of the dedication of the colleagues – who are all shareholders in the business throughout the last 12 months: “I know I am asking so much of Partners. Retail is changing fast around us. And the Partnership is adapting just as fast. What won’t change are the principles and values in which the Partnership is rooted. We have withstood our toughest test and emerged stronger.” But the business axed the Partners bonus in 2020 – the first time in over sixty years, and with further store closures possibly announced at the end of the month – these are concerning times for the retailer.
Source: Forbes – Business