John Lewis loses £517m last year

The John Lewis Partnership warned more of its department stores would be permanently closed after the “economic earthquake” of Covid-19 sent Britain’s biggest employee-owned group to a £517 million ($721 million) annual loss.

Multiple lockdowns have heaped pressure on store-based groups already struggling with tight margins and intense competition from purely online players.

The 156-year-old John Lewis had already reduced department store numbers to 42, having closed eight last July, impacting 1,300 jobs, as it grappled with the fallout from the crisis.

“Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store,” Chairman Sharon White said.

Talks were ongoing with landlords and final decisions on the stores to be axed were expected by the end of March.

White told reporters closures were “difficult decisions but absolutely necessary to be a lean, simple, fast business.”

She said the crisis had caused a massive shift in the way Britons want to shop with the partnership, which also runs the 332-store Waitrose supermarket chain – “probably a decade’s worth of change concertinaed into one year.”

“Our judgement is that those shopping habits have changed irreversibly,” she added.

The partnership’s huge loss for the year to January 30 versus a profit of £146 million in 2019-20 reflected exceptional costs of £648 million, mainly the writedown in the value of John Lewis stores owing due to the shift to online, as well as restructuring and redundancy costs.

John Lewis stores are now held on its balance sheet at almost half the value they were before writedowns this year and last.

Before the pandemic the group judged that £6 pounds in every £10 spent online with John Lewis was driven by its shops. That ratio has fallen to £3 in every £10.

White detailed a five-year recovery plan last October that would see the partnership invest to expand its online business and improve its stores, diversify beyond retail, form more partnerships and seek efficiency savings.

It plans to invest 800 million pounds in 2021-22 to support the turnaround and forecast financial results, including liquidity, debt ratio, and profit before exceptionals, which was £131 million in 2020/21, to worsen in 2021-22 before improving in later years.

($1 = 0.7169 pounds)