John Lewis axes staff bonus for the year and writes down value of department stores

The retailer has posted a loss before tax and exceptional items of £55m for the first six months

The John Lewis Partnership has reported a loss of 55m before tax and exceptional items for the half-year to 25 July 2020.

Trading profit was £739m, down 9.3% on the same period last year.

In a statement, the employee-owned retailer said it was “a creditable performance in the circumstances and ahead of expectations in our April trading update” with sale “a touch higher than last year – up 1%”.

Warning it would make little or no profit this year, the Partnership said it was writing down the value of its department stores by around £470m and will scrap the staff bonus.

Chair Sharon White said: “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.” 

She added: “It was with a great deal of sadness that we took the decision not to reopen eight John Lewis stores, and plan to close three Waitrose stores at Ipswich Corn Exchange, Caldicot and Shrewsbury, while selling Waitrose Wolverhampton to Tesco.

“I want to pay tribute to the dedication of Partners in those stores who have served customers, their communities and the Partnership for many years.”

Addressing the writedown, which with exceptional items takes pre-tax losses to £635m, she said: “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 about £470m, known as an ‘impairment’.

“This is a technical adjustment in our accounts and has no impact on our underlying profits or cash in the bank. There is some judgement here. If shops drove 10% more online sales in future, the impairment would be around £400m; 10% less and it would be around £570m.” 

 She also saluted the work of the Partnership’s Waitrose and John Lewis stores during the Covid-19 crisis, with an average 2.5m customers served each week, 110,000 care packages and gifts to NHS staff, the Herbert Parkinson textile factory reopened to make 12,000 protective gowns for the NHS, a quarter of delivery slots reserved for elderly and vulnerable people, and £2.7m committed to charities and local communities.

In John Lewis, online sales growth was strong at 73%, helping to offset the impact of shop closures, with overall sales down 10% on last year.

In Waitrose, like-for-like sales were up almost 10% on last year. Demand for online shopping remains strong and Ms White said the grocery business is now delivering around 170,000 weekly orders, up from around 60,000 before the pandemic. The average basket size is four times bigger for home deliveries than in store.