Worker-owned John Lewis Partnership said it would have to close stores after recording a pre-tax tax loss of £517m for the year to 30 January, down from £146m in the previous year.
The retailer says this is the result of substantial exceptional costs of £648m, mainly the write-down in the value of John Lewis shops owing to the pronounced shift to online retail, as well as restructuring and redundancy costs from store closures and changes to its head office.
Chair Sharon White said: “John Lewis shops are now held on our balance sheet at almost half the value they were before this year’s and last year’s write downs. Before the pandemic we judged that £6 in every £10 spent online with John Lewis was driven by our shops. The ratio has fallen to £3 in every £10. ”
Profit before exceptionals was £131m – up £61m on the previous year – but the the Partnership said it would have made a loss before exceptionals if it weren’t for Covid-related support from the government.
Looking ahead, Ms White said: “As spending shifts online we want to ensure our stores reflect how customers want to shop – ‘right space, right place’.
“We’ve undertaken substantial research into how shopping habits vary in different parts of the country and between online and stores. Customers tell us they want to shop John Lewis closer to home in more convenient locations and they want our stores to be more enticing.”
In light of this, John Lewis will reshape its store estate over the five year, with an emphasis on destination stores to showcase its profits, and new-format smaller, local stores. It will also trial the introduction of John Lewis shopping areas at Waitrose stores in in Godalming, Horley, Wallingford, Lincoln and Lymington, with a further rollout if the trial succeeds.
There will also be an improved Waitrose click & collect service and more improved local collection points through third parties like the Co-op Group.
But there will also be store closures, the Ms White warned. “Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store. Regrettably, we do not expect to reopen all our John Lewis shops at the end of lockdown, which will also have implications for our supply chain. We are currently in discussions with landlords and final decisions are expected by the end of March.
“Closing a store is one of the hardest decisions we can make as a Partnership. We are acutely sensitive to the impact on our Partners, customers and communities, particularly at a time when retail and our high streets are undergoing major structural change. We will do everything we can to lessen the impact and will continue to provide community funds to support local areas.”
In her statement to partners, Ms White said that business, local and national government, and communities would need to work together across the country to deal with impact of Covid-19 on the high street, communities and jobless youngsters.
“We are going through the greatest scale of change in the Partnership’s 156-year history,” she said. “As employee-owners, we share the responsibility of securing the partnership for future generations of customers and Partners. Difficult decisions taken now will hopefully set the course for those next generations.”