John Lewis furloughs 14,000 staff and implements spending cuts
The John Lewis Partnership today said it is furloughing more than 14,000 staff whose jobs are temporarily no longer supported by the business and cutting over £200m off its planned spending for 2020/21 as it fears sales for the full year may fall by as much as 40%.
In a trading update the business reported strong sales growth up 8% year-on-year since 26 January at Waitrose, but John Lewis trading has been mixed.
The retailer closed all of its John Lewis stores on 23rd March but has seen a significant spike in online sales, which have risen 84% year-on-year since the middle of March. The highest demand has been in areas linked to working and living at home such as technology and food preparation, looking after and entertaining children and keeping fit, which are some of the business’s less profitable lines.
“We are buying more Scrabble but fewer sofas,” said JLP Chairman Sharon White.
John Lewis sales fell 17% year-on-year since the middle of March, and 7% year-on-year since 26 January.
“Our worst-case scenario for the full year assumes significant sales decline between April and June, and weak sales thereafter,” said White.
“Over the course of the full year, this worst case would result in a sales decline of around 35% in John Lewis, around double the current level, while at Waitrose it would result in a more modest decline of less than 5%.”
The company said it is lowering its planned stock intake in line with slower trading in John Lewis.
Other measures to preserve liquidity during the pandemic include reducing operating costs, including cutting back on marketing spend by close to £100m. Negotiating with landlords regarding rent relief, including an immediate switch to monthly from quarterly payments. Working with banking partners to consider how extra flexibility can be provided, should it be needed.
The company said Government measures including the 12-month business rates holiday for England and Scotland will save around £135m this financial year, while deferred payment of VAT until March 2021 will help short-term cash flow.
White added that the Partnership has been trading for nearly a century and has survived a world war and bombings, economic crashes and crises. In a thank you to Partners, she said “we shall also come through COVID-19 too and emerge stronger.”
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