John Lewis, the renowned department store chain in the UK, is anticipating a significant decline in sales of up to 35% this year as a result of the Covid-19 pandemic. The company has already witnessed a 17% drop in sales since mid-March when it was forced to close its stores in order to prevent the spread of the virus. Although online sales have surged by an impressive 84% year-on-year during this period, it has not been enough to compensate for the loss in revenue from physical stores selling non-essential items. Essential products like work-from-home technology, cookware, and children’s toys have experienced increased demand, but they are generally less profitable for the retailer.
On a positive note, the company’s food retailer, Waitrose, has seen a more favorable outcome. Sales have increased by 8% since January 26 as consumers stock up on essential food and household items such as rice, pasta, long-life milk, home baking supplies, frozen foods, and cleaning products. However, even Waitrose is not entirely immune to potential sales declines and could face a 5% decrease this year in a worst-case scenario.
Acknowledging the challenging circumstances, over 14,000 John Lewis Partnership staff members have been placed on furlough. Nevertheless, the company has committed to ensuring these employees continue to receive their full contractual pay until the end of May. Additionally, the company has announced a one-off bonus of £200 for employees who are still working, excluding senior managers, as a gesture of appreciation and support.
To navigate through the uncertain business landscape, John Lewis is implementing proactive measures. Discussions are ongoing with landlords to secure rent relief and switch to monthly payments. Marketing expenditure will be reduced by nearly £100 million, and the company will adjust its planned stock intake to align with slower sales to preserve cash. Chair Sharon White has also accelerated a strategic review of the company, which is expected to be completed by the summer. This review will consider the changes in consumer behavior brought about by the pandemic, such as an increased shift towards online shopping and a preference for more sustainable shopping practices.
White expressed confidence in the company’s ability to withstand the crisis and emerge stronger, emphasizing John Lewis’ resilience in overcoming various challenges throughout its long history, including world wars, bombings, economic crashes, and other crises. She concluded with a message of gratitude and reassurance to John Lewis employees, stating, “Thanks to you, we shall also come through Covid-19 too and emerge stronger.”