John Lewis scrapes together 2% bonus, prioritising partners over profit, says GlobalData

FacebooktwitterredditpinterestlinkedinmailFacebooktwitterredditpinterestlinkedinmail

Following today’s release of John Lewis & Partners FY figures for 2019/20, Sofie Willmott, lead analyst at GlobalData, a leading data and analytics company, comments: ‘‘As UK department store retailers continue to struggle in a competitive landscape laden with product choice and hindered by weak consumer confidence, John Lewis & Partners is no exception, reporting a disappointing full year performance against feeble comparatives. Despite operating profit before exceptionals and partnership bonus falling to just £39.5m, generating a remarkably slim operating margin of 0.8% (versus 2.3% last year), the employee-owned retailer has decided its partners come first, awarding a 2% bonus – although this is its lowest since 1953. The reward is wise considering new chairwoman Dame Sharon White needs the backing of staff to plough ahead with the restructuring strategy initiated by her predecessor at the very end of his tenure, particularly considering she no longer has the MD of either brand to support her.

“The wheels are already in motion to bring the two brands together with the aim to reduce costs and boost profits for the partnership but it remains to be seen how closely they can be merged given the very different purposes (yet same culture and ethics) of the organisations. A separate leader of each brand would seem logical given strong leadership experience of both a grocer and a non-food retailer will be difficult to find.

“Plans to close stores were mooted again, preparing partners for probably a handful of its 50 shops to shutter over the next year or so. Despite having much fewer stores that its competitors, such as Debenhams which is closing one third of stores to bring its portfolio to just over 100, John Lewis & Partners’ branches are large and costly to run given the staff and stock needed to fill the space. As a significant chunk of its sales are now generated online and digital investment is planned to make the website ‘easier to shop’, the retailer can afford to streamline its estate and cull non-profitable branches, without taking a big hit on sales.

“Today’s results are far from encouraging however John Lewis & Partners’ plans will ensure it remains relevant to UK shoppers and its increased focus on quality, service (and services), value and sustainability will continue to be the backbone to its strong and well-respected brand image.”