John Lewis Partnership, one of the UK’s leading retailers, has reported a pre-tax loss of £517 million for the year ending January 30. The company’s announcement has caused a stir as it revealed plans to permanently close some of its John Lewis stores after the current lockdown. While the specific stores to be closed were not disclosed, the company is in talks with landlords and expects to make final decisions by the end of March.
This comes after John Lewis shut down eight stores last year, and there are speculations that another eight may follow suit. The retailer has faced an incredibly challenging year, evident from the substantial loss compared to the previous year’s pre-tax profit. However, the company managed to turn a profit before tax and exceptional items, thanks to the crisis support measures implemented during the pandemic.
Criticism has been directed towards John Lewis for keeping the business rates relief it received while other major firms returned it. However, given the magnitude of the loss, the company’s decision seems justifiable. It plans to accept the relief available from April to June but will review the situation moving forward.
The significant exceptional costs of £648 million have greatly impacted the pre-tax loss. These costs mainly stem from the devaluation of its physical stores due to the increasing shift to online retail, as well as restructuring and redundancy expenses. The value of the stores on the company’s balance sheet is now almost half of what it was before the write-downs of the past two years. Before the pandemic, physical stores played a crucial role, driving £6 out of every £10 spent online with John Lewis. However, this figure has declined to £3 out of every £10.
To achieve sufficient profitability by 2025/26, aiming for £400 million, John Lewis must take difficult measures, including store closures. The company plans to prioritize its online presence, especially since online sales have seen a significant boost. In the current year, online sales accounted for 75% of the brand’s total sales, compared to 40% before the pandemic.
To support this digital transformation, John Lewis has expanded its online services, hosting the largest virtual beauty event masterclass and expanding its Click & Collect service. Additionally, the retailer has introduced new fashion and beauty brands and aims to have 40% of profits generated from areas outside of retail, such as financial services and outdoor living, by 2030.
To facilitate its turnaround, the company will invest £800 million in 2021/22, a 40% increase compared to previous years. This increased spending, particularly in digital areas, may result in worse financial results in the current year but is expected to improve in the future. Investments will include digital enhancements, updates to major category propositions, expansions at the John Lewis Magna Park distribution site, and cost-reducing restructuring. Despite the planned closures, John Lewis will also invest in store improvements to enhance the customer experience and provide in-person expertise.
After conducting research on customer shopping habits, John Lewis plans to reshape its store portfolio to cater to changing preferences. This involves creating Destination Stores that offer unique experiences and services, as well as introducing smaller, local stores. The company also aims to integrate its two brands, testing John Lewis shopping areas within Waitrose stores. Positive feedback from this trial may lead to expanding the concept to a significant number of Waitrose locations, sourcing all general merchandise from John Lewis.
In conclusion, John Lewis Partnership has experienced a significant loss and plans to permanently close some of its stores while focusing on enhancing its online presence. The company aims to invest heavily in digital areas and customer service improvements to support its turnaround. By reshaping its store estate and bringing its brands closer together, John Lewis hopes to stay competitive in a changing retail landscape.
Useful links:
– [John Lewis Partnership website](https://www.johnlewisplc.com/)
– [John Lewis online store](https://www.johnlewis.com/)
