John Lewis launches strategic business review as profits plunge

John Lewis has warned it could close shops as a dive in company profits forced it to cut staff bonuses and launch a strategic review of the business.

The retailer said it needed to reverse its profit decline and return to growth through a “transformation” of its operations – this would involve “right sizing” its stores across both the John Lewis and Waitrose brands.

The review would include store closures “where necessary” as well as space reduction in existing stores, the retail giant said.

Sharon White, who took over as Chairman last month, said the Partnership is “stepping into a vital new phase” and that it would come out stronger on the other side of this review period, which was said “could take three to five years to show results”.

The conclusions of the review are expected to be announced in the Autumn. This year, staff bonuses have been set at two per cent, the lowest since 1953 when it paid no bonus.

“All of us are aware of the challenges in retail,” said Ms White. “New technology means that shoppers have never had so much choice, value and convenience. That is to be celebrated. And there is great opportunity for retailers who have an intimate understanding of their customers to respond to them in an agile fashion.

“Every Partner can make a difference this year by focusing relentlessly on service – wherever they are in the business. If we get it right, customers will return to shop with us and we’ll earn their lifelong loyalty.”

In Ms White’s statement, she announced that profits at the Partnership dropped by 23 per cent from last year to £123 million – the third year in a row that profits have fallen.

More specifically, weaker sales in the Electricals and Home departments were among the drivers of poorer operating profits at John Lewis stores, which were down £75 million to £40 million.

Ms White added: “We are confident that our new products and services and focus on outstanding customer service will reinforce the strength of our brands. We are planning for the market to remain volatile, but expect continued cash generation, allowing us to further strengthen our balance sheet and maintain our level of investment.”