August 8, 2022

Online Now Accounts For 60% Of Sales And Partners To Receive No Bonus

A stand out quote from the British High Street bellwether, John Lewis Partnership half year results highlights why the business is at such a critical juncture:

“Before the crisis we believed that shops contributed around £6 of every £10 spent online. We now think that figure is, on average around £3. This has the effect of reducing the book value of John Lewis shops by £470m.”

The business only recently announced the strategic move away from its “Never Knowingly Undersold” price promise. The pledge was part of the legacy of the business, reassuring customers that they could shop in confidence, but as fierce low pricing tactics from the competition became more prominent particularly online, John Lewis profits suffered.

And over the last few months we have heard soundbites from Chairwoman Sharon White on how the business might start to counter balance the seismic shift in consumer spending habits: the planned launch of a furniture rental programme, converting stores into office space and of course, significant job cuts and store closures. The business has announced 8 John Lewis closures of stores that were deemed financially unviable.

Its sister business, Waitrose is also cutting 4 stores as it sees a surge in demand for online grocery delivery, after recently separating from its long-standing delivery and logistics partner, Ocado.

The Partnership have also today confirmed that staff will not receive a bonus as White highlights the significant impact lockdown has had on its already challenged department store business.

The last time the business didn’t pay a bonus to staff was following the aftermath of World War II, with White remarking, “We came through then to be even stronger and we will do so again. 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.”

The potential of not receiving a bonus this year was something partners were warned of very early on in 2020, and prior to the real impact of Covid19. In March this year, White announced big changes for Waitrose and John Lewis to ‘reverse our profit decline.’ But will the non payment of the bonus lead to employees feeling deflated at a crucial peak period when they have more challenges that usual in delivering the expected quality of customer service in stores and online?

Announced plans in March highlighted the need for a 3-5 year programme of change to resize the business including store closures as necessary, and a vital new phase of change which White promised would see the business stronger as a result.

The results show a £55m loss for the six months to Jul 25, after higher costs offset an increase in the revenues. Online sales growth is strong at 73% intensified by lockdown and the following months of lower footfall in many stores. The business has sold more TVs and tablets and less trousers and trainers as consumers have evolved demand to products required for home working. Online now accounts for 60% of John Lewis sales.

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