John Lewis cuts bonus and puts stores at risk of closure
New John Lewis Partnership boss Sharon White this morning slashed workers’ bonuses and announced store closures as the struggling retailer posted a dive in profits for 2019.
The figures
John Lewis cut its bonus to two per cent today, down from three per cent last year, the lowest pay out to partners in 67 years.
Profit before tax, bonus, exceptionals and IFRS 16 fell 23 .1 per cent to £123m, from £160m the previous year, at the lower end of the company’s forecast.
The slump was driven by a significant decline in the department store business’s profit.
John Lewis’s operating profit were down £75m to £40m, driven by weaker sales in its home and electrical department as well as investment in IT. The partnership also took a £123m hit on the value of its shops as they played “less of a role in driving online purchases”.
Meanwhile, Waitrose boosted profit by £10m.
Gross sales slumped 1.5 per cent to £11.5bn. Waitrose like-for-like sales dropped 0.2 per cent and John Lewis’s sales fell 1.8 per cent.
Why it’s interesting
White today announced a strategic review as the former Ofcom boss – who took over in February – aims to reverse the struggling partnership’s profit decline.
She said the review – which is expected to complete in the autumn- will look at “right-sizing” the store portfolio, including closures, repurposing and space reductions in existing stores and new formats and new locations.
The company today announced the closure of three Waitrose stores that will close later this year in Helensburgh, Four Oaks and Waterlooville.
White said the company will continue to be an employee-owned partnership and said it will retain both the John Lewis and Waitrose brand.
In this morning’s announcement White did not address the partnership’s “never knowingly undersold” promise. Analysts have previously speculated that the company could scrap the price match pledge.
John Lewis also said today that it will invest significantly in Waitrose’s online offering ahead of the end of its partnership with Ocado. It also outlined plans to build a new fulfillment centre in Enfield to cope with demand.
Julie Palmer, partner at Begbies Traynor, said that John Lewis’ “fall from grace has been spectacular”.
“Like the rest of the high-street, the retailer has been impacted by rising business rates and has failed to translate its brick and mortar revenue to online sales,” she said.
“Despite attempts to streamline its structure and implement an effective strategy to plug the hole in its falling margins, customers are making more conscious decisions when parting with their money and no longer make multiple purchases from one location.
“The company is now having to consider store closures to cut costs in order to get itself back on its feet as its ‘never knowingly undersold’ backfired badly as floundering competitors hacked at prices in order to shift stock to balance the books.”