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John Lewis store closures: The reasons explained

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The owner of John Lewis has delivered the news that no retail worker wants to ever hear, but particularly not in the current climate: eight more of the chain’s department stores will close permanently.

John Lewis Partnership’s chairman Sharon White has said: “Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store.”

The chain, which is famously owned by its employees, went into the pandemic with 50 shops. After today’s confirmation of eight more closures added to eight announced in July, it will come out of it with 34.

But as White points out, the last year has been an “economic earthquake”. She says there are some areas where the size of store is just not sustainable.

Here we look at why some of the estate may not be reopening, how the John Lewis Partnership has done financially over the last year, and White’s plan to have more John Lewis divisions within Waitrose branches….

How many stores does John Lewis have and how many could close?

Employee-owned business John Lewis Partnership has 331 Waitrose shops and 34 John Lewis branches.

Last year the company shut eight of the department stores, with another eight announced today.

White , a partner and chairman, said: “Closing a store is one of the hardest decisions we can make as a partnership. We are acutely sensitive to the impact on our partners, customers and communities, particularly at a time when retail and our high streets are undergoing major structural change. We will do everything we can to lessen the impact and will continue to provide community funds to support local areas.”

Why would the company look to axe sites?

White told the Evening Standard that over the last two years the value of its John Lewis stores has halved.

The retailer is not alone in seeing retail property values decline. Even before the coronavirus outbreak and the resulting lockdowns, high street brands were grappling with a number of headwinds, from high business rates to biting online competition.

During the pandemic numerous retailers have won over scores of new online customers and potentially some of these people may be so impressed that they stick with digital. That could put further pressure on some physical stores.

John Lewis Partnership’s results for the 53 weeks to January 30 said John Lewis began the crisis as a 60:40 bricks and mortar: online retailer. That ratio has more than reversed.

Meanwhile at the start of the financial year, online accounted for 5% of Waitrose sales; it is now 20%.

The company said: “While there is clearly uncertainty over the extent to which these changes will endure, we are expecting much of the shift online to be permanent and are adapting the business accordingly.”

John Lewis Partnership is chaired by Sharon White

Where are popular John Lewis stores?

The firm said when shops were allowed to reopen last summer, footfall held up better in retail parks – easily accessible by car – than on the high street. It added: “This was similar for our standalone stores, which are not on the high street. Shopping centre and high street branches saw the steepest decline in numbers.”

Does the company still view physical shops as an important part of the business?

Yes. White says stores are important. But while “destination” branches will continue to be part of the estate, White says we can expect to see more local ways to shop at John Lewis in the future.

How will the group reshape and innovate its estate?

The company will look at new formats of smaller, more local shops “with the very best of John Lewis”.

It added that it is trialling the introduction of John Lewis shopping areas in Waitrose stores in five areas, and the early signs are positive. If successful, that model will be rolled out to a significant number of Waitrose shops. The plan is for all the general merchandise in Waitrose shops to be sourced from John Lewis.

White points to an example of where Waitrose and John Lewis could sit nicely together in some aisles: nappies, sold by the former, and baby grows sold by the latter.

Meanwhile, local branches could do well if much working from home continues beyond the virus crisis.

Looking ahead, the company added that digital investment across both brands will be at a significantly higher level than recent years.

How did John Lewis Partnership do in its financial year?

Property writedowns, Covid-19 disruption and restructuring costs contributed to it plunging into the red in the 53 weeks to January 30.

It posted a pretax loss of £517 million, compared to a £146 million profit in the prior 12 months.

Total revenue improved to £10.8 billion from £10.2 billion. Growth was led by a strong performance from Waitrose, which was classified as a “essential” retailer and therefore allowed to stay open throughout the pandemic.

But John Lewis stores had to shut at various points for lockdowns, although it could sell online and do click and collect.

Total like-for-like sales at Waitrose increased 10%, and Waitrose.com has grown fourfold since February 2020, now taking around 240,000 orders a week.

Any other comments from the chairman?

White said: “We are going through the greatest scale of change in the partnership’s 156-year history. As employee-owners, we share the responsibility of securing the partnership for future generations of customers and partners. Difficult decisions taken now will hopefully set the course for those next generations.”

What some retail commentators have to say?

Melissa Minkow, retail industry lead at digital consultancy CI&T said: “I’d urge observers to think critically about whether or not all brick-and-mortar store closures are a sign of failure. For John Lewis, this could very well be the beginning of a business model more reflective of the times and resonant with how consumers are shopping.”

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