Published on March 11th, 2021 | by The GC Team0
John Lewis warns of more store closures as pandemic accelerates shift to online
John Lewis today confirmed that not all of its department stores will reopen after lockdown, as the business recorded a loss before tax of £517m for the year ended 30 January 2021, compared to a pre-tax profit of £146m in the previous year.
The loss was the result of exceptional costs of £648m, chiefly due to the write down in the value of John Lewis shops owing to the pronounced shift to online, as well as restructuring and redundancy costs from store closures.
Eight of the businesses department stores did not reopen after the first lockdown in 2019, including the flagship regional store in Birmingham which opened in 2015.
Seven loss-making Waitrose stores also closed, and the Partnership’s head office costs are in the process of being reduced by 20%.
Partnership Chairman Sharon White said: “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. We are currently in discussions with landlords and final decisions are expected by the end of March.”
John Lewis shops are now held on the balance sheet at almost half the value they were before this year’s and last year’s write downs. Before the pandemic the business judged that £6 in every £10 spent online with John Lewis was driven by its shops. The ratio has fallen to £3 in every £10.
Trading operating profit was significantly challenged as the improvement seen in Waitrose, in part helped by the closure of the hospitality industry, was insufficient to cover the substantial decline in John Lewis as “non-essential” physical retailing closed temporarily.
The business is now implementing a five-year Partnership Plan, the first priority being to reduce 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% of our profits will come from areas outside retail, namely financial services, housing and outdoor living,” Sharon White commented.
“Our shops will always be important and we are proud of our presence on the high street across the country. They provide a sensory experience that online cannot, supported by the expert advice of Partners. And both brands will remain a blend of stores and online.”