The John Lewis Partnership has unveiled plans to close five Waitrose stores as it warned in a strategy update that profit for its 2018-19 year would be “substantially” below the previous year’s level, with first-half profit “close to zero”.
The mutual group, which runs the John Lewis department stores as well as the upmarket supermarket chain, said while it forecasts that Waitrose’s profit would grow over the year, this would be offset by declines in its department store business plus a drag from the significant extra costs of investing in IT systems.
In March, John Lewis reported a 22% drop in annual profit before tax and exceptional items to £289mln for 2017-18.
The group – which is owned by its 85,000 workers and has 53 Waitrose shops and 50 John Lewis stores - said it is to close four Waitrose convenience shops and one small supermarket.
It also announced that it will take steps to strengthen its balance sheet by a further £500mln over three years to invest in product and service innovation.
The partnership added: “This will be achieved by rebuilding profitability at Waitrose, creating more value from the property estate, and conducting a review of the Partnership’s pension scheme.”
Charlie Mayfield, chairman of the John Lewis Partnership, said: “As retail changes we need to tread a path that enables us to thrive as a business while building on the qualities that make us different. For us, the relentless pursuit of greater scale is not the right course.”
High street struggling, but CBI report upbeat
The partnership’s cautious update comes as store rivals Marks & Spencer PLC (LON:MKS), Debenhams PLC (LON:DEB), and House of Fraser and Debenhams have all recently revealed the extent of the struggles on the UK high street.
The latest warning seemed to fly in the face of a survey by the Confederation of British Industry on Wednesday, which said hot weather helped UK retail sales growth surge during the first half of this month.
The CBI report said retailers’ expected sales balance for July was steady at +18 and the volume of orders placed with suppliers rose at its fastest rate since November at +20.
It added that the rise in sales volumes was broad-based, with online sales, durable goods and department stores doing particularly well, however, clothing stores and furniture shops reported a fall in sales.