John Lewis to close more stores as Covid crisis wipes out profits

John Lewis says the shift to online shopping, restructuring plans, redundancies, store closures and cost of Covid crisis turbo-charged loss Photograph: David Lyons/Alamy

By Sarah Butler

Department store group records £517m loss and does not expect to reopen all stores in April when retail lockdown ends

John Lewis Partnership has warned it will not be reopening some stores when lockdown ends, after slumping to a £517m loss for 2020. The group, which also owns Waitrose, confirmed it would not be paying a bonus to staff for the first time in 67 years as chairman Sharon White said it was “not out of the crisis” yet for retailers caused by the Covid-19 pandemic.

John Lewis forecast its financial results for 2021 would be even worse, due to investment in its online shopping service and other measures in its turnaround plan. The staff-owned business’s first-ever full-year loss comes after £648m of one-off costs relating to the writedown in value of John Lewis shops amid the shift to online shopping, as well as restructuring and redundancy costs from store closures and head office reorganisation.

White said the group would be holding on to government business rates relief and furlough support worth £190m which had “helped to keep us running and avoid more severe restructuring”. White said the group intended to continue claiming business rates relief until June. White confirmed some John Lewis department stores would not be reopening when lockdown measures are lifted in April. Instead there are plans to open more John Lewis-branded areas in Waitrose stores around the country and examine the potential for “smaller, more flexible” local outlets.

The group is in discussions with landlords about the future of some shops and final decisions are expected by the end of March. 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. “We are not out of the crisis yet and the economic environment remains extremely uncertain.”

Sales at the John Lewis chain slipped just 4% to just over £4bn and operating profits were down by about 25% as online sales soared 73%, almost offsetting 20 weeks of store closures. Online now accounts for three-quarters of the department store’s trade, up from 42% before the pandemic. Sales were helped by a rush for technology to support home working and schooling. However, fashion and cosmetics sales dived as the need for workwear and outfits for social occasions slumped under lockdown restrictions.

At Waitrose, sales rose 10% to £7.6bn and operating profits rose 8% to £1.1bn. The supermarket also experienced a big switch to online trading which now accounts for 20% of sales, up from 5% before the pandemic. White said she expected most of the online shift to be permanent. Before the one-off writedowns, profits rose to £131m in the year to 30 January from £70m a year before, underpinned by the business rates support.

White said the outcome was better than her fears of a small loss as trading had been stronger than expected in the second half of the year, with consumers switching to online shopping during the national lockdowns.

Nick Bubb, an independent retail analyst, expressed surprise that the John Lewis Partnership (JLP) had neither paid out a bonus to staff or returned the Waitrose business rates relief, given what he described as a “decent” underlying performance. “With profits emerging so much better than expected, JLP should have changed its stance,” he said.

The group plans to invest £800m in 2021-22 to support its turnaround plans, including improving its online shopping infrastructure. White said this would mean that John Lewis’s next set of full-year financial results – including its cash levels and profit before exceptional items – would be worse, before improving the following year.

Source: The Guardian