John Lewis Partnership, a well-known British retailer that operates department stores and supermarkets, has announced a significant pre-tax loss of £517 million for the fiscal year that ended on January 30. However, what stood out even more in the company’s announcement was its statement regarding the reopening of its John Lewis shops after the lockdown. The company revealed that it does not expect to reopen all of its stores and is currently in discussions with landlords to make final decisions by the end of March. Reports suggest that the number of store closures could potentially increase, with eight more stores added to the eight that closed last year.

While specific sales figures were not disclosed, John Lewis Partnership acknowledged that the past year has been one of the most challenging in its history. The staggering loss of £517 million, compared to a pre-tax profit of £146 million in the previous year, highlights the immense impact of the crisis. However, the situation would have been even worse if not for the government support measures implemented during the pandemic. The company has faced criticism for retaining the business rates relief it received, unlike other major firms that have returned it. Nevertheless, the magnitude of the loss justifies the decision, and John Lewis Partnership has stated that it will accept the business rates relief available from April to June but will review this in the future.

The pre-tax loss was primarily driven by exceptional costs amounting to £648 million, mostly due to the write-down in the value of John Lewis shops caused by the shift to online shopping. The loss was also influenced by restructuring and redundancy costs. As a result, the value of John Lewis shops on the company’s balance sheet is now almost half of what it was previously. Prior to the pandemic, 60% of online sales with John Lewis were driven by its physical stores. However, this figure has dropped to 30% now. It will be interesting to see how this metric changes once the stores reopen.

To achieve its ambitious target of generating a profit of £400 million by 2025/26, John Lewis Partnership is implementing various strategies. The company is placing increased emphasis on online sales, which is evident from the impressive 73% increase in sales on johnlewis.com. Online sales now account for 75% of the brand’s total sales, a significant jump from 40% before the pandemic. Additionally, the company has expanded its online services and recently achieved a Guinness World Record for hosting the largest virtual beauty event masterclass featuring Charlotte Tilbury. Furthermore, the Click & Collect service has been expanded to over 900 locations, with almost 400 added in the last nine weeks. Customers can now collect their purchases from brands like Boden and Sweaty Betty.

In addition to digital initiatives, John Lewis Partnership has introduced new fashion and beauty brands, with plans to add more in the future. Its five-year Partnership Plan aims to reduce costs and reinvest the savings into enhancing customer service and non-retail growth. As retail margins decline, the company aims to derive 40% of its profits from sectors other than retail, such as financial services, housing, and outdoor living, by 2030. In support of its turnaround efforts in 2021/22, the company plans to allocate £800 million, a 40% increase compared to previous years. While this may lead to worse financial results in the current year, improvements are expected in the following years.

The investments include significant spending on digital initiatives, updating major category offerings such as Home, expanding capacity at its John Lewis Magna Park distribution site, and implementing cost-reduction measures. Despite the planned closures, the company is also committed to improving its stores. As online shopping gains more prominence, John Lewis Partnership aims to ensure that its physical stores align with customers’ preferences for a convenient and enjoyable shopping experience. Extensive research has been conducted on shopping habits in different regions and between online and physical stores. Customers have expressed a desire for John Lewis stores to be located closer to their homes and offer a unique sensory experience that cannot be replicated online, along with expert advice from Partners.

To reshape its store estate, John Lewis Partnership aims to transform some locations into Destination Stores that showcase exclusive products and provide experiences and services not found elsewhere. Additionally, the company plans to open smaller service stores in new formats that maintain the essence of the John Lewis brand. Integration of the John Lewis and Waitrose brands is also a key aspect of the company’s strategy. Current tests are being conducted on John Lewis shopping areas within select Waitrose stores, and initial feedback has been positive. If successful, this concept will be expanded to a significant number of the 331 Waitrose shops. The company aims to source all general merchandise in Waitrose from John Lewis, further aligning the two brands.