In the first six months of this year, the Partnership made a loss of £55m, about the same as this time last year, a creditable performance in the circumstances and ahead of expectations in our April trading update.
In a letter to partners the business said:
‘Sales were a touch higher than last year – up 1%. But shoppers spent more on less profitable lines such as laptops and loo rolls. We benefited from Government support through the furlough scheme, which we exited at the end of July, and business rates, which helped to offset £50m of additional pandemic-related costs like safety equipment.
‘Our cash and bank facilities position – the money we have to pay our bills – is strong. At the half year, we had £2.1bn compared to £1.5bn at the start of the crisis, mainly as a result of new borrowings.
‘We are expecting our debt ratio – our total net debts as a proportion of our cash flow – to worsen from 3.9 times – the position in January this year. We expect it to return to under 4 times in two to three years and we continue to target a level of around 3 times in the medium term.
‘In John Lewis, online sales growth was strong at 73%, helping to offset the impact of shop closures, with overall sales2 down (10)% on last year.
‘Sales momentum is starting to build in reopened stores, with sales down around 30% on last year, ahead of expectations. Stores in retail parks are down by around 15% and are doing better than city centres, especially London which is down around 40%. Home working has had a big impact on what people are buying – more TVs and tablets, fewer trousers and trainers.
‘Online now accounts for more than 60% of sales, from 40% before the pandemic. As a result of this pronounced shift to digital we had to reassess how much shops contribute to whether our customers buy online with us or not.
‘Before the crisis we believed that shops contributed around £6 of every £10 spent online. We now think that figure is, on average, around £3. This has the effect of reducing the book value of John Lewis shops by about £470m, known as an ‘impairment’. This is a technical adjustment in our accounts and has no impact on our underlying profits or cash in the bank. There is some judgement here. If shops drove 10% more online sales in future, the impairment would be around £400m; 10% less and it would be around £570m.
‘In Waitrose, like-for-like sales were up almost 10% on last year. The early days of stockpiling pasta and long life milk have given way to a varied basket with more fresh produce and a return to the weekly shop. Demand for online shopping remains strong and we are now delivering around 170,000 weekly orders, up from around 60,000 before the pandemic. The average basket size is four times bigger for home deliveries than in store. ‘