John Lewis sales have taken a nose dive after it was forced to shut stores across the country in the face of the coronavirus pandemic.
The embattled high street retailer was already facing one of the toughest periods in its history at the start of the year as group profits plunged to £146 million, down from £452 million three years ago.
The employee-owned company is now fighting for survival, having been dragged into the deepening high street crisis.
The John Lewis department store chain saw total sales tumble 17% in the weeks since March 15, after it closed all its sites on March 23.
John Lewis sales have plunged after it was forced to shut stores in face of coronavirus despite a surge in online orders
The high street retailer warned that a worst-case scenario would see the chain’s annual sales plunge 35%.
Nevertheless, John Lewis said online sales have jumped 84% as shoppers purchased more technology and food preparation products.
The retailer said demand has particularly spiked in some of its ‘less profitable lines’, with people ‘buying more Scrabble but fewer sofas’
.The John Lewis Partnership group said its Waitrose supermarket chain saw sales surge as shoppers stocked up on essentials.
Waitrose sales increased by 8% in the period since January 26 as supermarkets were buoyed by the crisis.
Sales increased both in store and online as shoppers bought more essentials like rice, pasta and long-life milk.
Demand for home delivery has been ‘especially strong’, it said, with the company increasing its delivery capacity by 50%, which puts it ‘in good stead’ ahead of the end of its contract with Ocado in September.
The John Lewis Partnership group said it is set to receive £135 million in savings from the business rates holiday and will reduce operating costs, including a cut of almost £100 million to marketing spending.
Who is Sharon White? Ex Ofcom chief faced with the ‘mammoth’ task of turning around John Lewis
Dame Sharon White
Dame Sharon White took over the helm at John Lewis Partnership in February.
The former Ofcom chief, 52, has enjoyed a glittering career in the civil service, but joined with no retail experience.
Earlier this year, the three most senior executives left the brand.
Ms White was already tasked with steering the partnership through a tough restructuring, merging the two firms and axing a third of head office staff – before the coronavirus pandemic hit.
Independent retail analyst Richard Hyman said: ‘It is a mammoth challenge. They’ve got a new leader with no experience of business, let alone retail.
‘How quickly is Dame Sharon going to become a genius retailer? Because that’s what they need.’
In a letter to partners, recently appointed chairwoman Sharon White said: ‘We are confident that the future of the business is strong.
‘Our short-term trading has though been significantly affected, principally because of the closure of all 50 John Lewis branches.
‘The Partnership has been trading for nearly a century. It has survived a World War and bombings, economic crashes and crises.
‘Thanks to you, we shall also come through Covid-19 and emerge stronger.’
At the beginning of March – just before the nationwide lockdown was announced – bosses announced ‘dire’ results at one of Britain’s best-loved names.
In March, bosses told 80,000 staff that their much-coveted bonus had been cut to about £370 each – the lowest level since 1953.
New boss Dame Sharon White, who joined from regulator Ofcom in Feburary, said it could take five years to return John Lewis to its former glory.
She said: ‘We need to reverse our profit decline and return to growth so that we can invest more in our customers and in our partners. This will require a transformation in how we operate as a partnership.
‘These are the most challenging but exciting times in retail for a generation.’
Ms White was already tasked with steering the partnership through a tough restructuring, merging the two firms and axing a third of head office staff – before the coronavirus pandemic hit.
Profits fell from £541m in 2017 to £162m last year, and outgoing chairman Sir Charlie Mayfield, 53, warned they would be ‘significantly lower’ in the year to January 2020.
John Lewis has struggled with rising bills for rents, rates and staff – a tough environment that has also taken a toll on its department store rivals.
The department stores posted a £37 million loss in the year to January 31, compared to £93million profit the year before. Waitrose posted profits of £212 million. The 156-year-old department store’s price promise has been in place since 1925.
It states that customers who found lower prices elsewhere on the high street would receive a refund for the difference. It is rigorously enforced by John Lewis, which checks its bricks-and-mortar competitors regularly for sales and promotions.
But heavy discounting at rivals such as Debenhams and House of Fraser, and the rise of Amazon, has led many to suggest it is out of date.
John Lewis will close three branches of grocery arm Waitrose – in Helensburgh, Dunbartonshire; Four Oaks, Sutton Coldfield; and Waterlooville, Hampshire – this year, in addition to the seven it closed last year.
The 400 employees affected who wish to stay with the group will be ‘actively supported’ to do so.
Cath Kidston confirms its 60 UK stores will not reopen after coronavirus crisis putting 740 jobs at risk as Primark owner furloughs 68,000 workers across Europe with chain’s sales plunging from £650m a month to zero
Cath Kidston is to permanently to shut its 60 UK stores with the loss of more than 900 jobs.
The fashion retailer confirmed its stores will not reopen once the coronavirus lockdown is over after the company’s owners secured a deal to buy back its brand and online operations following its fall into administration.
Baring Private Equity Asia (BPEA), which has held a stake in the retailer since 2014, said it will buy the online business, brand and wholesale arm from administrators Alvarez & Marsal.
It said the move will result in the ‘cessation of the retail store network’.
Cath Kidston is to permanently to shut its 60 UK stores with the loss of more than 900 jobs
The company confirmed that only 32 of its 940 staff will see their jobs secured as part of the deal.
Melinda Paraie, chief executive officer of Cath Kidston, said: ‘While we are pleased that the future of Cath Kidston has been secured, this is obviously an extremely difficult day as we say goodbye to many colleagues.
‘Despite our very best efforts, against the backdrop of Covid-19, we were unable to secure a solvent sale of the business which would have allowed us to avoid administration and carry on trading in our current form.
‘I would like to thank all our employees for their hard work, loyalty and patience over the last few weeks as we worked through this process.’
A spokesman for BPEA said: ‘While we are disappointed that the Covid-19 crisis has resulted in the cessation of the retail store network and impacted many employees, we are pleased to have secured a future for a number of Cath Kidston staff and the Cath Kidston brand in the form of a viable digital business.
‘Going forward we will continue to help the company grow through its e-commerce platform and international wholesale and franchise businesses.
Associated British Foods boss George Weston said the group had been ‘squarely in the path of this pandemic’ but would not reopen Primark stores until the disease is under control
‘We would like to thank Melinda and the company’s management team for their hard work in managing through this difficult economic crisis and establishing a viable future for the business in the UK.’
Meanwhile the UK’s high street woes continue to grow amid the coronavirus lockdown as 68,000 Primark staff are furloughed across Europe.
The owner of budget fashion firm Primark has also revealed a £248 million hit for unsold stock as all its stores remain shut.
Associated British Foods boss George Weston said the group had been ‘squarely in the path of this pandemic’ but would not reopen Primark stores until the disease is under control. Mr Weston said the company would have ‘had no option but to fire staff’ were it not for the furlough scheme.
A survey from the British Chambers of Commerce suggested around one in three British businesses has furloughed between 75% and 100% of its workforce.
Primark has seen sales plunge from £650 million a month to zero as coronavirus has caused the 376-strong chain to shut completely, with no online business to fall back on.
A message from the CEO of Primark, Paul Marchant, talking about store closures during the coronavirus crisis
Half-year results showed pre-tax profits slumped as Primark was left with piles of stock it was unable to sell amid the global coronavirus lockdown, falling 42% to £298 million in the six months to February 29.
Total charges in the first half soared to £309 million, compared with £79 million a year earlier, including the £248 million stock costs.
However, Mr Weston said the company would not launch online in a bid to shift stock it has been unable to sell.
He said: ‘We will sell that stock in stores but it might take a while.
‘It might be in a year’s time but it’s not going to deteriorate and we will just have to wait until we can open stores again safely.
‘I think this is the cost of Covid rather than not having online operations.’
Primark revealed on Monday it had agreed to pay an additional £370 million to suppliers to cover stock currently in production or yet to be delivered after facing criticism over order cancellations during the coronavirus crisis.
The fashion chain said the deal will cover products which were in production or due for shipment by April 17, having previously committed to pay for orders which were in transit or booked for delivery by March 18.
Bosses also set up a fund to support the thousands of garment workers affected.
Mr Weston laid bare the ‘human tragedy’ of the Covid-19 crisis as he reported half-year figures, as he said two of the group’s employees have died from Covid-19 in the past three weeks while another remains in intensive care in the United States.
Its food and agriculture business – spanning sugar, groceries and ingredients, including brands such as Twinings tea and Kingsmill bread – is helping the firm weather the crisis while cost cutting will also help it mitigate half the operating costs of Primark while stores remain shut.
The company said it has seen a 20% jump in bread sales, while other store cupboard products such as Blue Dragon noodles and Ryvita crackers have also seen sharp sales increases.
Mr Weston said: ‘Much as I would love to be allowed to reopen Primark stores across the UK, continental Europe and the USA soon, because lockdown has so harmed our business and our supply chains, I know that we must not do so until we have suppressed this disease.
‘When we are allowed to reopen we must make our Primark stores safe for our staff and our customers, even if that means ensuring there are fewer people shopping at any one time and so accepting lower sales at least until the remaining risk is minimal.
‘In time, we can rebuild the profits. We can’t replace the people we lose.’
A survey from the British Chambers of Commerce suggested around one in three British businesses has furloughed between 75% and 100% of its workforce.
Meanwhile High Street fashion chains Oasis and Warehouse have fallen into administration, leading to more than 200 immediate job losses.
Closed shops on a quiet Kings Road in Chelsea, West London, as life in Britain continues during the lockdown
Some 1,800 staff across the shops, concessions and head office will be furloughed and receive 80% of pay.
The brands will continue to be sold online ‘short-term’ while the administrators try to sell the brand.
The two brands, which run 90 stores, appointed auditor Deloitte to run the process.
The Oasis and Warehouse Group has been looking for a saviour for weeks but could not close a deal due to the pandemic.
It is owned by failed Icelandic bank Kaupthing.
The lockdown has already claimed Laura Ashley, electrical retailer Brighthouse, and restaurant chains Carluccio’s and Chiquito.
Many firms were already reeling after last year, the worst for the high street in a quarter of a century.
Meanwhile, there are fears are building that gyms, pubs and restaurants may never reopen as landlords threaten them with eviction for unpaid rent during the coronavirus lockdown.
Nearly 3,000 gyms and leisure centres now face the threat of closure, while top chef Yotam Ottolenghi has warned that restaurants are suffering the same issue.
The Oasis and Warehouse Group has been looking for a saviour for weeks but could not close a deal due to the pandemic
Pubs and non-essential shops have also faced trouble paying rent, amid fears they will not be able to reopen after the pandemic because they will have no cash left.
Up to 100,000 jobs could be at risk at gyms with trade body UKActive calling for urgent action to protect places of exercise which remain shut due to the pandemic.
Fresh legislation to protect commercial tenants was brought in last month, but it does not stop landlords forcing them to pay rent withheld due to the lockdown.
A study of 34 non-food retailers including Dunelm, JD Sports, John Lewis and Next has found that many may not survive the pandemic sweeping the nation.
Even after government support, more than half of major non-food UK retailers will run out of cash within six months, according to the report.
The study was conducted by professional services firm Alvarez & Marsal (A&M), in partnership with Retail Economics.
It found that five out of the 34 major non-food retailers analysed already had negative cash flow at the outbreak of the pandemic.