Letter from Sharon White to Partners
I want to thank you for your extraordinary efforts over the past six months. Throughout the course of the pandemic, Partners have stepped up - going above and beyond to deliver exceptional service to our customers and supporting one another.
We are in year one of our five-year Partnership Plan to return the business to sustainable profit of £400m a year, the level of profit required to meet our ambitions for customers, Partners and communities. This half year, we have had to take difficult but necessary decisions to reduce costs and improve our competitiveness.
We have closed eight John Lewis stores and are consulting on the closure of an associated delivery hub. The number of head office roles have been reduced and we are consulting on plans to have fewer managers in John Lewis and Waitrose. This has been painful for the Partnership. Eighty per cent of affected Partners have found new roles in the Partnership in the half, while retraining support has been available to Partners to secure work outside. We are also creating new jobs: a total of 500 next year to operate our new warehouse at Fenny Lock. We have faced our biggest ever test and we will come through stronger. That is because we are a Partnership and we are invested in our collective success.
Our financial performance in the first half year shows encouraging progress against the Partnership Plan.
Half year results
As at full year, we report our profits using two measures - before and after exceptional items. Measuring our profits without these exceptional items gives a better indication of our underlying performance.
For the first six months of the year, our profit before exceptional items1 was £69m. That is £124m up on 2020/21, when the Partnership made a loss2 of £55m. Last year’s results were, of course, heavily affected by the pandemic. Therefore 2019/20 is a more meaningful benchmark. Compared to the first half of 2019/20 when we made a loss2 of £52m, profit is up £121m. Cost reduction is a key priority and we made savings of £66m in the first half. We received business rates relief of £58m3.
The Partnership had exceptional costs of £98m in the half, for two main reasons. First, property costs of £24m, principally to settle lease obligations arising from John Lewis shop closures. Second, redundancy costs of £54m from restructuring, reflecting our commitment to ensure proper support for Partners leaving the Partnership. These upfront costs will help to drive an annual reduction in costs of £300m by the end of 2022/23, improving our competitiveness and freeing money to invest in growth.
Including these exceptional items, the Partnership made a loss before tax of £29m. This is a significant improvement on last year’s loss before tax of £635m, which was dominated by a write down in the value of John Lewis stores. This year is down on the first half of 2019/20 when profit before tax was £192m because of a one-off gain from the closure of the defined benefit pension scheme.