John Lewis to axe staff bonus as it sinks to loss

First time since 1953 that mu­tual has not paid out a share of prof­its to part­ners, with risk of more job cuts

The Daily Telegraph - Business - - Front Page - By Laura Onita

JOHN Lewis Part­ner­ship is to axe its fa­mous staff bonus for the first time in more than 60 years af­ter slump­ing to a loss in the open­ing half of 2020.

Dame Sharon White, boss of the em­ployee-owned re­tailer, warned it was on course to make “a small loss or a small profit for the year” af­ter coro­n­avirus rav­aged sales at its de­part­ment store chain.

“I would ex­pect it to be a cou­ple of years with­out a bonus,” she added. It is the first time since 1953 that John Lewis has not paid out a pro­por­tion of prof­its to staff.

The mu­tual slumped to a £635m pre-tax loss in the six months to July 25, af­ter it had to write down the value of its stores by £470m. On­line sales now ac­count for al­most two thirds of its sales.

It said that be­fore the pan­demic, on­line rev­enues ac­counted for about 40pc of sales, but this had now in­creased to 60pc.

Rev­enue and net debt were flat at £5.5bn and £2.3bn re­spec­tively. It lost £200m in sales af­ter 50 John Lewis branches were forced to shut in March.

Fi­nance chief Pa­trick Lewis said he was “very pleased” with the per­for­mance of the busi­ness.

Dame Sharon em­pha­sised that the mu­tual was not a con­ven­tional busi­ness and “we are here to make suf­fi­cient profit, not max­i­mum profit”. Eight John Lewis stores will close per­ma­nently, in­clud­ing travel hubs at Heathrow and London St Pan­cras, putting 1,300 jobs at risk.

The top brass de­clined to rule out fur­ther job losses at its head of­fice af­ter it pre­vi­ously said it wanted to cut costs by £100m.

Dame Sharon, who for­mally joined in March and is at­tempt­ing to re­vive the com­pany’s for­tunes, in­sisted both John Lewis and sis­ter busi­ness Waitrose had enough cash in the bank to pay the bills.

The part­ner­ship said it had ac­cess to £2.1bn, com­pared to £1.5bn at the start of the cri­sis, mainly be­cause it bor­rowed more money. Be­cause it is owned by em­ploy­ees, the busi­ness can­not raise cash from out­side in­vestors. John Lewis said it would start pay­ing a bonus again once prof­its hit £150m and its debt falls.

“I know this will come as a blow to part­ners who have worked so hard this year,” Dame Sharon said.

Both busi­nesses are bank­ing on Christ­mas to im­prove prof­its, like most re­tail­ers. The loss-mak­ing de­part­ment store chain has been lean­ing on prof­itable Waitrose to sur­vive.

The chair­man said she would give more de­tails about her strat­egy in Oc­to­ber af­ter the com­pany ad­mit­ted she was con­sid­er­ing some rad­i­cal mea­sures such as turn­ing the ex­cess space in shops into hous­ing.

On Wed­nes­day, it emerged John Lewis could rent out half of its Ox­ford Street flag­ship store as of­fice space to build up funds as it fo­cuses on on­line.

AL­MOST one in two firms are plan­ning to cut jobs or freeze hir­ing in the next 12 months as a sec­ond wave of Covid-19 looms, the CBI has said.

The busi­ness group’s an­nual survey of 248 em­ploy­ers, car­ried out with re­cruit­ment agency Pertemps, showed com­pa­nies were also gear­ing up to cut hours and re­struc­ture.

Al­though 51pc of re­spon­dents ex­pect to main­tain or in­crease the num­ber of per­ma­nent roles, 46pc will ei­ther axe full-time jobs or stop hir­ing al­to­gether as a “two-speed re­cov­ery” takes hold. The find­ings come ahead of the clo­sure of the Gov­ern­ment’s fur­lough scheme at the end of Oc­to­ber.

The survey also re­vealed a dras­tic fall in the share of com­pa­nies that expected to have a larger work­force in a year’s time. Some 48pc of firms are ex­plor­ing busi­ness over­hauls “as a pri­or­ity”, al­though one in 10 is set to take up the Gov­ern­ment’s new Kickstart scheme to fund work place­ments for young peo­ple. The resur­gence of the pan­demic comes as busi­nesses are also forced to pre­pare for po­ten­tial dis­rup­tion from a no-deal tran­si­tion with the Euro­pean Union from Jan­uary.

Matthew Fell, CBI pol­icy chief, said: “The UK labour market has been un­der heavy stress since the out­set of the Covid-19 cri­sis and, al­though the econ­omy has started to re­open, pres­sure on firms re­mains acute.”

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