In a bombshell letter to staff, Sharon White this week told 80,000 staff at the mutual, which also includes Waitrose, that its prized bonus will likely be ditched next year as the company wrestles to improve profitability.
At the start of the Covid crisis, sources at the group warned it was unlikely all 50 of its department stores would reopen after the lockdown. White confirmed plans to close a several unnamed shops, with staff informed in mid-July. Around 20 stores have reopened since non-essential retailers were given the green light to reopen on June 15 with distancing measures in place. Plans to open a further 10 were announced today, including Oxford Street on July 16.
In the letter, seen by the Standard, White said: “The difficult reality is that we have too much store space for the way people want to shop now. As difficult as it is, we now know that it is highly unlikely that we will reopen all our John Lewis stores. Regrettably, it is likely that there will implications for some Partners’ jobs. We are in active discussions with landlords about ending some leases and renegotiating others to make the terms more flexible.”
One of two large offices in Victoria, normally home to 450 staff, will close. “We are rethinking our head office space to cement more flexible working that has become a feature of the crisis, and will be relinquishing Partnership House in London,” White said. The adjacent office at 171 Victoria Street, usually home to 2400 staff, will stay open.
On the bonus, she said: “We entered the crisis with weakening profits, and we have taken a number of actions to preserve cash. Support from the Government has been a big help – they have paid most of our furlough costs and given us a holiday from business rates. Trade too has not been as bad as our worst-case scenario thanks to a lot of hard work from our Partners. However as our competitors reopen we expect trading to be tougher in the second half of the year. There is clearly a lot of uncertainty but as things stand, it is hard to see the circumstances where we will be able to pay a bonus next year. I know this will be a blow for partners who have made sacrifices these past months.”
In March, John Lewis revealed annual profits slumped 23% to £123 million and it slashed its annual bonus to 2% of salary, the lowest since the payment was skipped in 1953. White last week named a senior Co-operative executive, Pippa Wicks, to head John Lewis while former Sainsbury’s director James Bailey was hired in April to run Waitrose.
The former Ofcom boss kicked off a strategic review of the business on joining in February, and the results are due at the end of this month with staff informed in the autumn. A restructuring of its “technology and change” function, paused at the start of lockdown, has recommenced. Yesterday John Lewis informed 244 IT staff in Bracknell it is outsourcing their jobs, and they will switch to Indian tech giant Wipro in November.
White added: “We are also seizing opportunities to regrow; exploring how we best use our department store space to meet the needs of our customers – formats and locations, non-retail use, more combined Waitrose/John Lewis shops, different category mixes, and higher investment in stores where we can improve value to customers.”
She said the company is working on growing its Home department online; its Waitrose.com division, which will find itself competing with longstanding partner Ocado’s M&S joint venture in the autumn; and improving customer service. It is also ramping up plans to stock more John Lewis products in Waitrose stores and online.
John Lewis’ online sales were around 40% of revenues pre-Covid and, after becoming 100% during lockdown, White believes it is a “reasonable assumption” that online could account for as much as 60% to 70% of total sales this year and next.
White concluded: “The pandemic has led to profound shifts in the way we all live and shop, even our sense of self. While this coming period of transformation wil sadly mean the end of some Partnership stories, we have to change for the future of the Partnership. We have to resize the business – facing into and not shying away from difficult decisions – and seize the opportunities to regrow. The prize is a sustainable Partnership that is still thriving in 100 years.