John Lewis warns of further store closures following annual losses of £517m

UK retail giant John Lewis has today reported annual losses of more than £517m, and has warned that future store closures could be on the horizon. The company does not expect for all of its department stores to reopen after the current lockdown ends.

The figure, which represents the year to January 2021, is against profits of £146m the previous financial year.

It is being reported that John Lewis was looking to close eight more stores across the UK as a result of today’s announcement. There are currently 42 department stores, after eight closed over the last year.

John Lewis Partnership Chairman Sharon White said: “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 will do everything we can to lessen the impact and will continue to provide community funds to support local areas. We want to ensure our stores reflect how customers want to shop – ‘right space, right place’.”

Industry reaction

Paul Kirkland, Retail and Hospitality Business Development Director at Fujitsu said: “John Lewis’ warning of further store closures is yet another stark reminder of the tumultuous year the high-street has endured. With the pandemic driving prolonged bricks-and-mortar closures for months on end, and with customer confidence at an all-time low during the periods of intermittent opening, John Lewis is just one of many department stores to feel the impact of the last year.

“When John Lewis opened in 1864, it became synonymous with high-quality goods and exceptional customer service. But its steadfast brick and mortar stores – once a cornerstone of the British retail sector –no longer align with the demands of the modern, younger customer plus dropping the likes of its price match promises caused further decline. After all, the pandemic has accelerated the demand for online shopping due to the ease, efficiency and convenience it provides and that’s set to continue as lockdown measures are lifted. In store shopping has, by comparison, fallen by the wayside.

“If John Lewis is to recoup losses, further investment in an omnichannel strategy is needed, especially to facilitate a more complete click and collect offering which remains a popular option for consumers today. As John Lewis looks to the future, a sharp focus is also needed on data-sets regarding customer footfall and feedback to enable the remaining stores to trade with relevance and profitability. With a data-driven approach leading the business, it will also provide a strategic strategy regarding store locations; enabling branches pain points to be dealt with in their infancy.

“Due to John Lewis’ exceptional customer service, it’s unlikely the name will disappear off the high-street in its entirety. However, an evolving omnichannel and data-driven approach will certainly help revive the business in the coming year, as well as reinvestment in its store formats to freshen up its customer offer and demonstrate more relevance.”

Dr Paul Simmonds, Warwick Business School, said: “Today’s results announcements from John Lewis shouldn’t have come as any surprise given the turmoil currently facing the retail sector and the tone of recent briefings from the company.

“It reported a pre-tax loss of £517m, having incurred £648m of exceptional charges relating to a store closure and restructuring programme much of which was announced last September.

“While underlying performance appeared to hold up well with pre-tax pre-exceptional profits of £131m, an increase of £61m in 2019, it would have been a pre-tax loss without the benefit of government covid support schemes. For the first time since 1953, there was no staff bonus for 2020.

“Waitrose was a bright spot, increasing sales by 10 per cent to £7.6bn and operating profits by 7.7 per cent. Its new post-Ocado delivery operation is now processing 240,000 orders per week.

“John Lewis is not immune from the pressures facing all high street retailers, which have seen high profile companies such as Debenhams and Arcadia Group cease trading. However, it does have a strong online presence which has offset the pandemic closure of its stores. Unsurprisingly, this is the activity that it will be focusing on in future.

“Essentially, in future John Lewis will not need as many department stores as it expects 70 per cent of its sales to be online by 2025. To what extent does it now reduce its high street presence?

“The high street has been changing for several years reflecting the move towards online shopping but the pandemic has undoubtedly accelerated this shift. Changes that might have taken another 5-10 years have happened in the last year.

“While 2021 might see a slight reversal as consumers return to stores once lockdown restrictions are lifted much of the change is permanent and the trend to online shopping will continue.

“The partnership has already announced 3,000 redundancies and the closure of eight of its 50 stores with more to follow; a list was expected today but negotiations with landlords are continuing and final decisions will be made towards the end of March. The recent closure of the flagship Birmingham store, which was only opened in 2015, shows that the group doesn’t see any stores as being ‘sacred’ suggesting decisions will be financial rather than sentimental.

“It will be interesting to see how the partnership evolves, especially cross-overs between the John Lewis department and Waitrose food stores. Fewer department stores won’t necessarily mean its presence is reduced across the country if the plan for mini-stores within Waitrose is pursued successfully. The restructuring, which is expected to yield £300m of annual savings, needs to transform the partnership to compete in the marketplace that is changing rapidly and will be very different in five years.

“Eyebrows were raised when Dame Sharon White became chair given her lack of retail experience although given the closures and redundancy announcements of the last six months she appears willing and able to make difficult decisions.

“The future success of John Lewis will depend on how quickly she’s learned the ropes as the current retail environment is proving challenging enough for those that have spent their working lives in the sector… just ask Sir Philip Green!”

Dr Gordon Fletcher, of the University of Salford Business School, said: “The announcement of the first full-year loss for the John Lewis Partnership is a blow that comes from multiple punches. The impact of the pandemic has been to rapidly accelerate change in the retail sector at a pace that no large business can counter.

“The impact of this changing pattern of purchasing has forced the partnership to write down the value of its physical stores. Their footprint is no longer as valuable as they once were as a result of the move to online. The financial result has prompted a management decision to not reopen some John Lewis stores after lockdown.

“The big headline of the story hides the deeper reality that the food retailing sector has continued to grow during lockdown and Waitrose turned a profit over 2020. This could partially be put down to Waitrose and other food outlets being one of the few places we can still visit other than home and work. The end result is that we will see less John Lewis stores on the high street and more John Lewis products in Waitrose stores.

“For those not at direct risk of redundancy from these proposed closures, the biggest blow as the UK’s largest employee-owned business is that a loss means no bonuses for the John Lewis staff. And with at least some of that bonus reasonably expected to have been spent in-store the impact of the loss coupled with fewer John Lewis stores will continue to be felt in the partnership’s trading figures into next year too.”