The John Lewis Partnership has published its annual report and accounts, and updated on trading at John Lewis and Waitrose amid the coronavirus pandemic.
The pandemic has significantly changed the trading patterns in both brands. In Waitrose, we have seen strong sales growth up 8% year-on-year since 26 January. Items in highest demand have been cupboard essentials like rice, pasta, long life milk; home baking; frozen foods and cleaning products. Sales have increased in both our shops and online. Demand for home delivery has been especially strong and we have increased our capacity by 50%, which puts us in good stead ahead of the ending of the Ocado contract in September.
In John Lewis, trading has been mixed. With stores closed, we have seen a significant spike in our online sales which are up 84% year-on-year since the middle of March. The highest demand has been in areas linked to working and living at home like technology and food preparation but also in looking after and entertaining our children and keeping fit. However, these are some of our less profitable lines. We are buying more Scrabble but fewer sofas. Overall, John Lewis sales are down 17% year-on-year since the middle of March, and down 7% year-on-year since 26 January.
Our worst case scenario for the full year assumes significant sales decline between April and June, and weak sales thereafter. Over the course of the full year, this worst case would result in a sales decline of around 35% in John Lewis, around double the current level, while at Waitrose it would result in a more modest decline of less than 5%.
CASH AND LIQUIDITY
We started the financial year with just over £900m cash and investments in the bank and with access to a further £500m of undrawn committed bank facilities. Six weeks into the crisis, we are holding broadly the same level of cash and investments. But with such unprecedented trading volatility we have a range of actions that we are ready to take to secure the financial sustainability of the Partnership.
The Government has introduced a 12-month business rates holiday for England and Scotland. This will save the Partnership around £135m this financial year. The Government has also deferred payment of VAT until March 2021, which will help our short term cash flow.
The Board has already taken a number of steps to preserve liquidity. These include:
– Lowering our planned stock intake in line with our slower trading in John Lewis.
– Reducing operating costs, including cutting back on our marketing spend by close to £100m.
– Minimising capital and investment commitments: Our capital and investment spend for 2020/21 will be over £200m less than originally planned.
– Furloughing more than 14,000 Partners whose jobs are temporarily no longer supported by the business.
– Negotiating with landlords regarding rent relief, including an immediate switch to monthly from quarterly payments.
– Working with our banking partners to consider how extra flexibility can be provided, should it be needed.
In addition, the Executive Team, Non Executive Directors of the Partnership Board, the Independent Directors and I will be taking a 20% cut in pay from April, initially for three months.
With these actions and continued close attention, I am confident that we have sufficient cash to operate successfully through a broad range of potential scenarios.
EMERGING STRONGER FROM THE CRISIS
I announced in March that we will be undertaking a Strategic Review of the Partnership, to strengthen our core retail business and develop new services outside retail. The review will now be accelerated and will be substantially complete by the summer. It will seek to take account of changes in consumer behaviour to come out of the pandemic, such as a more pronounced shift to online and a desire to shop in more sustainable ways.
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 too and emerge stronger.
Partner & Chairman
Source : Insight DIY & John Lewis Partnership