Retailer takes hit
John Lewis sales could plunge 35% this year
Department stores are currently closed
John Lewis has seen a 17% slump in sales during the lockdown and says in the worst case it could see revenue this year plummet by more than a third.
The department store chain has seen a spike in online sales of 84% year-on-year since the middle of March with a surge in demand for products linked to spending more time at home, including keep fit equipment and games.
But it said this “has not been enough to offset the loss of shop trade”.
Overall John Lewis sales are down 17% year-on-year since the middle of March, and down 7% year-on-year since 26 January.
Demand at its Waitrose supermarkets has risen sharply but operating costs have increased too, partly because of expanded online delivery.
Insisting the business remains strong, chairman Sharon White, said: “Our worst case scenario for the full year assumes significant sales decline between April and June, and weak sales thereafter.
Sharon White: customers are buying more Scrabble, but fewer sofas
“Over the course of the full year, this worst case would result in a sales decline of around 35% in John Lewis, around double the current level, while at Waitrose it would result in a more modest decline of less than 5%.
Products associated with keeping fit, technology, entertaining children and food preparation have all seen significant sales increase online at John Lewis. The statement noted that the customer is “buying more Scrabble, but fewer sofas.”
The board and senior managers have taken a 20% pay cut for an initial three months, while all non-management partners and first level managers will receive a one-off award of £200. More than 14,000 staff who have been furloughed, largely as a result of the closure of John Lewis shops, will receive full contractual pay until the end of May.
It has acknowledged that these are “difficult times for suppliers” and said it is sticking by its commitment to pay smaller food suppliers with a turnover below £100,000 within seven days. It is donating £200,000 from the Waitrose charitable foundation to support overseas farmers.
The business has lowered its planned stock intake and reduced operating costs, including cutting back on marketing spend by close to £100m.
Capital and investment spend for 2020/21 will be over £200m less than originally planned. The firm is negotiating rent relief with landlords, including an immediate switch to monthly from quarterly payments.
Six weeks into the crisis, and the company said it is holding broadly the same level of cash and investments.
The government has introduced a 12-month business rates holiday for England and Scotland which will save the Partnership £135m this financial year, and it has also deferred payment of VAT until March 2021, which will help short term cash flow.