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
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.”