John Lewis cuts losses to £29m but warns of Christmas uncertainty

The owner of John Lewis and Waitrose slashed losses to £29m in the first half of its financial year after it cut costs and benefited from business rates relief, but warned it faced “significant uncertainty” about trading over Christmas.

The better than expected performance came as the John Lewis Partnership closed 16 loss-making department stores and laid off thousands of staff as well as accepting £58m in tax relief from the government.

About 300 people left the business in the half year, but the group has previously announced it is consulting staff on more than 2,500 job cuts resulting from planned store closures and management changes.

The staff-owned group said it was possible it could begin paying a bonus to staff in 2022, a year earlier than expected, after sales rose 6% to almost £5.9bn in the six months to 31 July and losses shrank dramatically from £635m marked up a year ago.

The company ditched its annual bonus in March this year for the first time in 67 years and has said it will not revive the payout until annual profits exceed £150m. Sharon White, the chairman of the partnership, said the possibility of paying the bonus in March 2022 was “stretching but not impossible and it is all to play for in the second half”.

John Lewis said it would make a decision on the bonus and whether it could pay back business rates relief early next year.

Nick Bubb, an independent retail analyst, said John Lewis’s trading “blew away expectations”.

John Lewis benefited from its significant investment in digital retailing with three-quarters of department store sales now online, compared with 40% before the pandemic. Waitrose also prospered online, despite its split with Ocado, with digital orders now making up 17% of sales compared with 11% pre-pandemic.

Total sales at Waitrose rose 2% year on year and were 10% higher than pre-pandemic levels, largely driven by online expansion including booking £1m of sales a week via fast-track delivery service Deliveroo.

Department store sales rose 12% compared with the same period last year, and were 1% better than pre-pandemic levels. The division also increased operating profits by 93% to £295m as shoppers bought more clothing and homewares, which have better profit margins.

White said the job cuts and restructure had been painful but added: “We are really encouraged by the first half performance. We have seen positive momentum.”

She also warned: “As we look ahead, there is significant uncertainty. Like the whole of retail, we are managing global supply chain challenges and labour shortages. We are seeing inflationary pressures, which we expect to persist.

“Even with the success of the vaccination programme the course of the pandemic this winter is hard to call.”

John Lewis said it had chartered extra container ships, alongside other retailers and one of its delivery partners, to ensure stores have enough products delivered from the far east in time for Christmas.

As Morrisons, the UK’s fourth largest supermarket, looks likely to follow its bigger rival Asda into private-equity ownership, White also tackled rumours of interest in Waitrose. “We haven’t been approached and we are not in the market for selling either brand,” she said.