17th Sep 2020 10:13
(Alliance News) - John Lewis Partnership on Thursday said it will pay no bonus for the first time since 1953 as it swung to a first half loss after losing GBP200 million in sales and booking chunky impairments due to Covid-19 lockdowns.
In the six months to July 25, the department store chain and supermarket operator actually posted a 1.1% annual rise in total trading sales to GBP5.57 billion from GBP5.51 billion. Total trading sales include valued added tax, the partnership noted.
Revenue was also higher, up 2.7% annually, at GBP4.92 billion from GBP4.79 billion, though John Lewis was unable to stave off a bruising swing to a pretax loss of GBP635 million from a profit of GBP192 million.
Sharon White, who joined as chair of John Lewis back in February, said the Waitrose grocery unit saw "surging demand" during the initial lockdown. The John Lewis department store chain meanwhile, booked GBP471 million in branch impairments during the period.
"In Waitrose, like-for-like sales were up almost 10% on last year. The early days of stockpiling pasta and long life milk have given way to a varied basket with more fresh produce and a return to the weekly shop. Demand for online shopping remains strong and we are 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," the company said.
In the John Lewis department store unit alone, like-for-like sales were down 9.5% year-on-year with total trading sales 9.7% lower.
Chair White added: "I said to partners in April that I could not see the circumstances in which we would be able to pay a bonus next March. The partnership board has now confirmed that there will not be a bonus next year given our profit outlook.
"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."
John Lewis does not expect to pay a bonus until profits top GBP150 million and its debt ratio falls below four times. It forecast that it might take two to three years until its debt ratio falls below this level.
"Once our profits rise above GBP300 million and a debt ratio below 3 times, we would expect to pay a bonus of at least 10%."
The last time the company did not pay a bonus was in 1953 and the last time one was axed was 1948, when John Lewis was dealing with the fall out of World War Two.
Looking ahead, White said: "The outlook for the second half is clearly uncertain given the broader macroeconomy. Christmas trade is also particularly important to profits in John Lewis and I would ask Partners to do everything we can to serve customers brilliantly both in John Lewis and Waitrose. In April, we set out a worst case scenario for the full year of a sales fall of 5% in Waitrose and 35% in John Lewis.
"That remains our worst case view. We now believe the most likely outcome will be a small loss or a small profit for the year. As I have mentioned previously, we are targeting GBP100 million head office savings, and we are aiming to make these savings as early as possible this financial year and next."
On Wednesday, the company closed four Waitrose stores. The units were located in Caldicot, which is in Wales, Ipswich Corn Exchange, Shrewsbury and Wolverhampton. The latter unit is being sold to Tesco PLC.
By Eric Cunha; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Tesco