Alongside disappointing year-end results, the John Lewis Partnership warned that not all of its department stores will reopen after lockdown restrictions ease next month, although it plans to step up investment in those that remain trading.
The group also confirmed it would not be paying a bonus to staff for the first time in 67 years after the group swung to a loss of £517m for the year to 30 January, against profits of £146m the previous year.
The loss resulted from £648m of one-off costs relating to the writedown in value of the John Lewis shops amid the shift to online shopping, as well as restructuring and redundancy charges from store closures and a head office reorganisation. Before the exceptional items, profits rose from £70m to £131m on lower costs and good performance of its supermarket business during the pandemic.
Operating profit at Waitrose rose 8% to £1.15bn on turnover up 11% (+10% like-for-like) to £7.04bn. In contrast, operating profits in the John Lewis business were down 25% to £554m. However, a big swing to online sales meant turnover at the department store chain was down only 1% to £3.73bn.
The Partnership did not confirm which John Lewis stores would not be reopening, stating it was currently in discussions with landlords. Final decisions are expected by the end of this month.
In July last year, John Lewis announced that it was permanently closing eight of its 50 department stores. Recent reports have suggested at least another eight will be shut for good as part of its restructuring programme that aims to reduce costs by £300m over the next couple of years and realign the business to latest shopping trends.
Chairman Sharon White said today: “Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store.”
She confirmed that 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” that would have impacted further jobs.
The Partnership is forecasting that its financial results for 2021 could be even worse, due to investment in its online shopping service and other measures in its turnaround plan. It expects to increase spending to around £800m over the next year developing various areas such as digital, store improvements, and product ranges.
“We are not out of the crisis yet and the economic environment remains extremely uncertain,” added White.
NAM Implications:
- JLP is feeling the effect of the double whammy
- The direct impact of its ‘first time ever’ non-payment of staff bonus
- And the indirect impact (on its customers) of JLP retention of government business rates relief and furlough support worth £190m
- Both of which might be solved by splitting the two business models…
- …in readiness for what might eventually be the closure of John Lewis…?
