John Lewis falls to first ever loss in 157-year history
John Lewis will permanently shut several more department stores after it fell to its first loss in its 157-year history.
The closures are the second time the partnership, which also owns Waitrose, has been forced to take drastic action to protect the business in the pandemic.
It is fighting back after losing a mammoth £517m in 2020 because of closures and consumers’ rapid shift to online shopping.
The firm is also reviewing its Never Knowingly Undersold price pledge, which has been in place since 1925, and is already cutting prices to widen its appeal.
It is thought that around eight of department stores will shut, on top of eight shops closed last year, as part of plans to cut £300million of annual costs.
Chairman Dame Sharon White said: “It’s the biggest economic challenge and public health emergency anyone has lived through, a real economic earthquake. It’s a decade’s worth of change in the space of a year. Those shopping habits have changed irreversibly.”
The retail giant did not say exactly how many of its 42 John Lewis shops will close, saying a final decision will be made at the end of March following talks with landlords.
Such a move would likely result in hundreds of redundancies. It has already shed 1,300 shop staff and 1,500 head office workers. The closure of the large outlets will also be a blow to British towns, which are already reeling from the closure of 600 Debenhams and Arcadia stores.
In total 20,000 stores are expected to close their doors permanently this year, costing 200,000 retail jobs.
Retail expert, Dr Gordon Fletcher, of the university of Salford Business School, looks at what the future holds for this staple of the high street.
“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,” Dr Fletcher said.
“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.”
Commenting on the news, Paul Kirkland, Retail and Hospitality Business Development Director at Fujitsu, looked at solutions which can help revive retail businesses in the coming year.
“John Lewis’ warning of further store closures is yet another stark reminder of the tumultuous year the high-street has endured,” Kirkland said. “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.”