Business

John Lewis plunges to £99m loss as inflation bites

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OHN Lewis plunged to a £99 million loss in the first half of the year and pledged a £500 payment to full-time staff to help ease the cost-of-living crisis.

It also promised to give free food at work for 14 weeks over winter, increase pay for new partners by 4% at a cost of £10 million and boost grants to staff most hit by inflation.

But the annual bonus to partners based on profits is plainly at risk.

Sharon White, the chair, told the Standard: “The partnership model means we can take a longer-term perspective. We will take a hit to profits to help our partners. We will make sure they are able to eat and eat well.”

She said the outlook is “highly uncertain” and that she could not say when the group might return to profits. It made £69 million for the same period to July last year.

“I’m a realistic optimist,” she said. “We will control the controllables.”

She praised the adaptability of staff who have “responded robustly and rapidly” to fast changing circumstances that have included “three once-in-a-generation” events in the last few years, by which she means the financial crisis, Covid and now soaring inflation.

Sales remain healthy, at John Lewis department stores, rising 3% to £2.1 billion, but fell 5% to £3.6 billion at Waitrose.

Waitrose is seen as a high-end grocer likely to struggle to compete with Aldi and Lidl, though White says its “Essentials” range is doing well.

White is trying to reinvent the business while retaining its core values. It wants to expand into financial services and build rental homes, something she says is “taking shape”.

The John Lewis Partnership has £1.5 billion in cash and credit to help weather future shocks.

It notes that it makes most of its money over Christmas. And said workers returning to offices had helped sales in City centre stores.

Earlier this year JLP restored its bonus payment to staff, handing them 3% of pay, about 1.5 weeks worth.

Retail analyst Nick Bubb said today: “It will need a Christmas miracle for JLP to pay a bonus this year.”

The business admitted in its statement today: “We will need a substantial strengthening of performance, beyond what we usually achieve in the second half, to generate sufficient profit to share a Partnership Bonus with Partners”.

In her letter to staff, White said: “No one could have predicted the scale of the cost of living crisis that has materialised, with energy prices and inflation rising ahead of anyone’s expectations. As a business, we have faced unprecedented cost inflation across grocery and general merchandise. I know Partners throughout the business are really feeling it, after two tough years of the pandemic and necessary – but difficult – restructuring. My great thanks to everyone for your continuing commitment in these times of uncertainty. I know it has not been easy.”

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