John Lewis Partnership reported a loss for the year, and plans to lean in on categories that are doing well, such as home. The British retailer is also shifting more stores to smaller service-oriented formats that cater to local customers.
In a Nutshell: “Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store,” said Sharon White, partner and chairman at John Lewis. The company, she added, expects some stores shuttered for lockdowns to remain closed when restrictions lift, “which will also have implications for our supply chain.” The retailer is in talks with landlords, with final decisions forthcoming by the end of the month, she said.
White said that the “climate emergency presents an even greater challenge than the pandemic, and we believe now is the time to accelerate efforts to improve sustainability.”
The company’s e-commerce presence at Johnlewis.com grew 73 percent from 40 percent before the crisis. The retail chain added click & collect to over 900 locations at its Waitrose operations, and includes purchases from apparel brands Boden and Sweaty Betty. In addition, 30 new fashion and beauty brands have been added to its stores and online, and another 50 are currently in the process of being introduced, with many brands “independent and British.”
Growth investments include a greater emphasis on digital, and the update of offerings for major categories, including home. The company said it has been doing research on how its customers are shopping. Noting that they have said they want to shop John Lewis closer to home, the company said it will “reshape our store estate” over the next five years. Destination stores and smaller, more local shops, are on the agenda.
“We entered this year with our financial performance already challenged—profits and Partner bonus having fallen for the past three years. We are having to take very difficult decisions to return the business to a path of sufficient profit of 400 million pounds by 2025/26. Last year we closed eight John Lewis stores and seven Waitrose stores that were loss making, and we are in the process of reducing the cost of our head office by 20 percent,” White said.
One bit of good news White noted was that the company has “seen limited impact from Brexit so far operationally” due to the company’s advance preparations and the Brexit trade deal. She noted that one area of temporary business disruption has been deliveries to Northern Ireland, but that those deliveries are expected to “resume” before the summer.
Net Sales: Net sales fell 5 percent to 1.70 billion pounds ($2.37 billion) from 1.80 billion pounds ($2.51 billion). At the John Lewis retail operation, sales fell 25 percent to 554 million pounds ($773.4 million) from 734 million pounds ($1.02 billion). Excluding the 53rd week for the year, sales would have declined by 10 million pounds ($14 million). At the company’s Waitrose grocery business, sales rose 8 percent to 1.15 billion pounds ($1.60 billion) from 1.06 billion pounds ($1.48 billion).
Earnings: The company reported a loss before tax of 517 million pounds ($721.8 million) against a profit before tax of 146 million pounds ($203.8 million) in the comparable year-ago period. On an adjusted basis, the company posted a profit of 131 million pounds ($182.9 million), or up 87 percent, from a profit of 70 million pounds ($97.7 million), a year ago. Profit on an adjusted basis was helped by Covid-19 crisis-related support from the U.K. government.
“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,” John Lewis Partnership said.
CEO’s Take: “We now have a five-year Partnership Plan. The first priority is to reduce our costs and reinvest the proceeds in improved customer service to ensure that John Lewis and Waitrose remain the go-to brands for quality, value and sustainability, with greater ease and convenience. With retail margins declining and the Partnership wishing to return more benefit to Partners, customers and communities, we are aiming that by 2030, 40 percent of our profits will come from areas outside retail, namely financial services, housing and outdoor living,” White said. “Many customers will have accumulated savings over the past year, having been less able to spend on holidays and going out. This pent up demand might be spent shopping or on the experiences that they have been deprived of in the past year. Equally, with unemployment and inflation both forecast to rise our customers may be more hesitant about spending and more cost conscious.”