Watch: Coronavirus - John Lewis Partnership axes staff bonus as it slumps to £635m loss
John Lewis has confirmed staff will receive no bonus for the first time since the aftermath of World War II, as it revealed it had lost hundreds of millions of pounds this year.
The retailer’s latest results reveal it lost £635m ($823m) in the half-year to 25 July, having made a £192m profit in the same period a year earlier.
It said it now expected a “small loss or a small profit” for the full year as stores have reopened, but sales remain 30% down on last year. Its worst-case scenario remains a sales drop of 5% at Waitrose and 35% at John Lewis.
The company announced last month it would axe eight stores, putting up to 1,300 staff at risk, and is looking to cut £100m in costs at its head office “as early as possible.” Four Waitrose stores are also set for closure.
The latest statement confirms staff, who as partners typically receive a bonus, will not receive a payout next year. “I know this will come as a blow to Partners who have worked so hard this year. The decision in no way detracts from the commitment and dedication that you have shown,” said chair Sharon White in a letter to staff published online.
She said the company expected to begin paying bonuses again when its profits exceed £150m and and debt ratio falls below four times. A bonus of “at least” 10% is expected when profits rise above £300m and the debt ratio falls even further.
“The Partnership found itself in a similar position in 1948 when the bonus was halted following the Second World War. We came through then to be even stronger than before and we will do so again,” added White.
The retailer announced in August it would shut two full-size department stores in Birmingham and Watford, its travel hub shops at Heathrow and St Pancras, as well as four of its home-focused stores in Croydon, Newbury, Swindon, and Tamworth.
But the latest statement provided some grounds for optimism for the retailer. Online sales growth has been strong, “helping to offset the impact of store closures” during lockdown.
John Lewis online revenue was up 73%, and retail park stores’ revenue is down only around 15%, compared to a 40% year-on-year decline in London. Its website’s share of sales has risen from 40% pre-virus to 60%.
“Home working has had a big impact on what people are buying – more TVs and tablets, fewer trousers and trainers,” added its latest unaudited statement. Meanwhile take-up is “high” for services now available online, such as personal and home styling, beauty and nursery advice.
Waitrose like-for-like sales were up almost 10% on last year, and online weekly orders have almost trebled from 60,000 to 170,000. “The early days of stockpiling pasta and long life milk have given way to a varied basket with more fresh produce and a return to the weekly shop.”
“The outlook for the second half is clearly uncertain given the broader macroeconomy. Christmas trade is also particularly important to profits in John Lewis and I would ask partners to do everything we can to serve customers brilliantly both in John Lewis and Waitrose,” added White’s letter.