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John Lewis eyes more store closures amid £517m loss

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WATCH: John Lewis warns over more shop closures after tumbling to £517m loss

UK high street retailer John Lewis has warned it may have to close more stores as it reported a record loss of £517m ($721m) on Thursday.

The company said high street store closures due to pandemic restrictions, along with restructuring and redundancy costs, means it is considering shutting down more stores permanently in 2021.

The company, which runs as a partnership, giving each employee part-ownership of the firm, recorded a loss before tax of £517m in 2020, down from a profit before tax of £146m in 2019.

Chairman Sharon White said that “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.”

“We are having to take very difficult decisions to return the business to a path of sufficient profit of £400m by 2025/26," she added.

John Lewis, devastated by the coronavirus as retail took a major hit, said it had support from the government of £190m in 2020, which was made up of business rates relief and furlough support, and which it said was critical for covering the direct operational costs relating to COVID-19 and the substantial hit to trading operating profit.

Location of John Lewis stores that have permanently closed

Heathrow

St Pancras

Croydon

Newbury

Swindon

Tamworth

Birmingham

Watford

Last year, many supermarket chains returned almost £2bn of business rates relief, since they were allowed to stay open during lockdowns.

While its supermarket Waitrose was allowed to stay open during lockdown, this was “insufficient to cover the substantial decline in John Lewis as 'non-essential' physical retailing closed temporarily,” the company explained. It did not give back its rate relief.

Last year it closed eight John Lewis stores and seven Waitrose stores that were loss-making, and it is in the process of reducing the cost of its head office by 20%.

There will also be no no staff bonus this year for the first time in over six decades. White said, "we wish we were in a position to pay a bonus and it has been a very difficult decision not to."

She added that the company will restart bonuses as soon as profits (before exceptionals) reach £150m on a sustainable basis and debt ratio is below 4 times. It will also go back to paying voluntary real living wage when profits rise to £200m.

Online shopping was a bright spot for the company: Waitrose.com grew fourfold since February 2020, is now taking around 240,000 orders a week, and stands as a £1bn sales business.

Johnlewis.com sales were up 73%, and this year made up three quarters of the brand’s sales, from 40% before the crisis.

READ MORE: John Lewis to axe 1,500 jobs

Looking forward, the company is working on a five-year plan, which includes reducing costs and reinvesting the proceeds in improved customer service.

It is aiming that by 2030, 40% of its profits will come from areas outside retail, namely financial services, housing and outdoor living.

“Many customers will have accumulated savings over the past year, having been less able to spend on holidays and going out. This pent up demand might be spent shopping or on the experiences that they have been deprived of in the past year,” the company noted.

John Lewis is now targeting a £300m a year cost reduction by 2022/23 and plans to invest £800m in 2021/22 to support its turnaround.

Given this raised level of investment, its expect its financial results to worsen in 2021/22 and then improve in later years.

It wants to invest in digital across both brands, “at a significantly higher level than recent years" and “reshape” its store estate so that its brick and mortar outlets are “exciting places to shop, more reflective of the tastes and interests of local customers.”

“This will require investment and we are working closely with landlords and local authorities. We are keen to play our part in the revitalisation of the high street,” it added.

Back in November, John Lewis had announced plans to cut 1,500 jobs at its head office between then and April 2021. The retailer had said the job cuts would “save another £50m on top of £50m of recent efficiencies, a significant contribution to our £300m target.”

The company also announced at the time that Patrick Lewis, executive director of finance, will step down at the end of this year after 26 years at the firm.

He will be succeeded by Bérangère Michel, currently executive director of customer service, and a former finance director for John Lewis.

WATCH: What UK government COVID-19 support is available?

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