John Lewis & Partners says it is working to become digital first as it looks to continue simplifying how the business works, with plans to add extra services outside of retail and consider acquisitions to grow the company.
In an update today (30 July) on its strategic review, the UK department store retailer says it expects John Lewis to be 60% online retailer, from 40% pre-Covid-19, and Waitrose to rise above 20% from 5%.
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By GlobalData“As customers increasingly shop online, we will become digital first. We have ‘catch-up’ investments to make in johnlewis.com,” chairman Sharon White says in a letter to Partners. “Shops will always be crucial to the brand but they will be in support of online. Over the next five years we expect to rebalance our shop estate so that we have the right space in the right locations where people want to shop.
“John Lewis Home will be available in Waitrose. We will get more experimental with store formats. Shops will showcase our brilliant products – displaying great design with more space given over to experiences that cannot be found anywhere else.”
In April, John Lewis announced plans to accelerate its strategic review to be completed by the summer. Today, it said the review should see green shoots in the Partnership’s performance over the next nine to 12 months, and profits recovering over the next three to five years.
White says the review has identified five areas of focus over the coming months: driven by purpose, strengthening retail, partnering to grow, expanding into more services, and simplifying how we work.
“We will simplify how we work, taking out duplication and cost. Our central teams will work in service of our customers and we will give more freedom to frontline Partners to do what’s best for customers. We are still targeting at least GBP100m of savings in head office costs. We have reduced the number of senior managers by one third, and our transformation of Tech & Change – which draws on new technology and expertise from outside suppliers – also helps with the target. We will aim to make savings as early as possible this financial year and next. These are very difficult decisions and I deeply regret the personal impact on Partners.”
Of the ideas for additional services submitted to John Lewis from Partners, four have been selected for further development: financial services, horticulture, private rented housing, and rental/resale/recycle.
Of the latter, White says: “This is a growing priority for our customers. Options include creating a market leading channel for rental of our products or building a marketplace to sell used’ products.”
She adds: “We clearly won’t be able to achieve all this alone. So we will create partnerships with other businesses who respect our ethos and can bring resources or capabilities we don’t have. We are already in a number of commercial discussions and are also looking at acquisitions.”
Meanwhile, White says the business is in need of a transformation and the next nine to 18 months will be crucial for the company.
“As you can see there’s more work to do on detailed planning, but I hope that you get a good sense of our future direction. I am very conscious that a strategy –unless it is supported by Partners and is well executed – is just another piece of paper. It is how we deliver on the plan and the commitment from all Partners that will make the difference.
“The executive team and I will be spending time with Partners, beginning this autumn, to discuss the strategy, and what it means for each of you. We plan on visiting every site over the course of the year, mixing virtual and physical meetings. The next few months of trading are clearly crucial.”
Earlier this month, the group announced plans to permanently close eight John Lewis stores, placing around 1,300 Partners into consultation. The news means the total store portfolio will now include 42 shops. Reports also surfaced of plans to close one of the Partnership’s London offices in Victoria, home to 450 staff before lockdown.
In April, John Lewis had warned full-year sales could decline by as much as 35%. For the 2019/20 period, the retailer recorded annual profits before its partner bonus programme, tax and exceptional items of GBP123m. Gross sales were 1.5% lower year-on-year at GBP11.5bn.
