John Lewis has suffered a steep fall in revenues after shoppers opted to buy “more Scrabble but fewer sofas” during the lockdown.
Sales are down 17% since coronavirus restrictions were imposed – and the retailer will now accelerate a shake-up which it has previously warned could see permanent store closures.
John Lewis – which has temporarily closed all 50 of its department stores during the lockdown but is still operating online – expects a slump of up to 35% for the full year in a “worst case scenario”.
By contrast its sister company, supermarket Waitrose, has seen sales rise strongly, helped by demand for pasta, rice, long-life milk, home baking ingredients, frozen foods and cleaning products. Its stores remain open.
John Lewis Partnership (JLP), the employee-owned business behind both brands, has furloughed more than 14,000 partners as a result of the lockdown.
It has also slashed about £300m from investment and marketing spending for the year and asked for flexibility from landlords and lenders as it seeks to preserve cash.
JLP will also benefit to the tune of £135m from the government’s business rates holiday, while its top executives are taking a 20% pay cut from April – initially for three months.
But it has still found the money for nearly £2m worth of pay-outs to recently departed bosses.
Paula Nickolds – ousted in January as managing director of the department store business – received £939,773, while Rob Collins, who was in charge of Waitrose until October, was given £892,362.
The details were disclosed as JLP published its annual report and trading update.
It revealed that sales at Waitrose were up by 8% since 26 January – though its operating costs have also risen as it expands online delivery.
Sales were down by 7% at John Lewis over the same period, weighed down by the 17% fall since the start of the lockdown in March.
That latter period has also seen a spike in online demand – up 84%, but not enough to make up for the loss in shop trade.
“The highest demand has been in areas linked to working and living at home like technology and food preparation but also in looking after and entertaining our children and keeping fit,” said Dame Sharon White, JLP’s chairman.
“However, these are some of our less profitable lines.
“We are buying more Scrabble but fewer sofas.”
Dame Sharon added that the partnership review announced in March “will now be accelerated and will be substantially complete by the summer”.
“It will seek to take account of changes in consumer behaviour to come out of the pandemic, such as a more pronounced shift to online and a desire to shop in more sustainable ways,” she said.
The update comes after JLP last month slashed its annual staff bonus for the seventh year in a row – taking it to 3%, its lowest level since 1953 – as it reported a 23% fall in annual profits.