The John Lewis Partnership (JLP) has restored its staff bonus after narrowing losses as its turnaround strategy gathers pace. However, the group admitted that there were more challenging times ahead, with inflation stemming from the Covid recovery and Russia’s invasion of Ukraine putting a strain on consumer spending power.
In the year to 29 January, the company reported a bottom-line pre-tax loss of £26m – an improvement of £491m on 2020 when it launched its plan to save costs, which ultimately led to the closure of underperforming stores and thousands of job cuts. Total group sales were up 1% to £12.5bn.
Underlying profit before exceptional items grew 38% to £181m, achieving its minimum threshold of £150m for restoring its renowned staff bonus. Having last year not paid one for the first time in 67 years, all workers will now receive a 3% bonus, equivalent to 1.5 weeks pay. The executive team are donating their bonuses to the British Red Cross.
JLP also announced that it would pay all staff at least the independently verified living wage of £9.90, alongside a 2% pay rise.
Chairman Sharon White said: “With our partners, like the whole country, facing a cost-of-living squeeze, we believe that this is the right time to pay the voluntary real living wage, nationwide.”
The group’s profit performance was driven by a £170m reduction in costs and record sales at its John Lewis department stores. They were up 8% like-for-like on last year (+4% as reported to £4.9bn) after bouncing back from the effects of the pandemic. Against two years ago, sales were 10% higher like-for-like (2% as reported).
At Waitrose, sales rose 1% like-for-like to £7.5bn (down 1% as reported) and up 11% like-for-like on two years ago (up 9% as reported).
White stated that the business had made a good start to its turnaround plan but noted it was only one year through its five-year transformation. “Looking ahead, we see continued uncertainty from global events, affecting the economic environment, our customers, Partners and society,” she said.
“As inflation and energy prices rise, our customers face higher living costs. While this creates uncertainties as we look ahead, we remain focused on investing significantly in our Partnership Plan to transform and grow our business.”
The group’s priorities for the year ahead include investing £119m in its John Lewis stores, digital services, and distribution capabilities. A further £55m will be spent carrying out 23 major refurbishments of Waitrose stores and £72m invested in the chain’s digital services and distribution.
JLP is also in the process of revamping its loyalty schemes to make them more relevant to today’s shoppers, whilst dropping its ‘Never Knowingly Undersold’ pledge in its department stores alongside a commitment to “great value prices” as consumers become more cost-conscious.
The group added that it would be targeting more cost savings, although it had no further plans for job losses and store closures.
Commenting on the results, Richard Lim, CEO of Retail Economics said: “It’s been a painful transition period for the retailer but coming out of the pandemic it appears to be on a much stronger footing. Underlying profitability bounced back following tough decisions last year to cut headcount and close stores.
“However, significant obstacles face the business as ongoing challenges from the pandemic collide with a cost of living crisis. While the least affluent households will be under the most intense pressure, the shock to living standards will reverberate far and wide as consumers cut back discretionary purchases and trade down to cheaper alternatives. As recessionary behaviours kick in, the retailer will be hoping that a wider array of products through their ANYDAY ranges attract new customer segments without risking diluting their brand.”
NAM Implications:
- Could be said that JLP are coming towards the end of the beginning of their comeback…
- So restoring the Partner-bonus is a good idea.
- That hopefully will not have to be reversed as the new economic realities kick in…
