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John Lewis issues profit warning as MD steps down

City AM logo City AM 09/01/2020 Joe Curtis
© Getty

John Lewis & Partners issued a profit warning today and said its managing director will leave the struggling business next month on the back of underwhelming Christmas sales.

The retail partnership warned full-year profits will be “substantially down” on last year as it revealed significant drops in both John Lewis and Waitrose revenue.

It also said managing director Paula Nickolds will step down in February, calling it “the right time for her to move on”.

The department store chain also warned it may not pay a bonus to staff for only the second time in its history as its financial year draws to a close.

“The Partnership Board will meet in February to decide whether it is prudent to pay a partnership bonus,” Mayfield said. “The decision will be influenced by our level of profitability, planned investment and maintaining the strength of our balance sheet.”

Paula Nickolds © Getty Paula Nickolds

John Lewis revealed that gross sales slipped 2.3 per cent year-on-year at £1.13bn over the crucial Christmas trading period.

Waitrose also suffered a 1.3 per cent decline to £1.03bn due to shop closures, though like-for-like sales rose 0.4 per cent.

Overall the John Lewis Partnership saw gross sales slide 1.8 per cent to £2.16bn.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, said: “We saw a good sales performance in Waitrose & Partners, despite a weak grocery market, with like-for-like sales up 0.4 per cent.

“In John Lewis & Partners like-for-like sales were two per cent down on last year. Operationally – across availability, service, delivery and online – we saw a strong performance in both brands.”

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Mayfield hailed a 4.7 per cent rise in beauty sales to put the division “comfortably ahead” of rivals. But home sales and electrical sales dropped 3.4 per cent and four per cent respectively.

Black Friday demand rose 10 per cent year on year but sales waned in subsequent weeks.

While the partnership expects Waitrose profits to be broadly in line with last year’s results, at John Lewis, “profits will be substantially down on last year”.

“ We therefore expect that Partnership profit before exceptionals will be significantly lower than last year,” the company warned. 

Paula Nickolds

Paula Nickolds © Getty Paula Nickolds

Nickolds was set to become executive director of brand and marketing as well as service and digital innovation across the group but the board and Nickolds have had a change of heart.

John Lewis said: “After some reflection on the responsibilities of her proposed new role, we have decided together that the implementation of the Future Partnership structure in February is the right time for her to move on and she will leave the Partnership with our gratitude and best wishes for the future.”

Sharon White joins as John Lewis Partnership’s new chairman in February.

The restructure at the partnership will unite the John Lewis and Waitrose leadership teams under one structure in time for the arrival of former Ofcom boss White.

The shake-up has reportedly cut one in three senior management roles. 

John Lewis initiated the overhaul after recording a pre-tax loss of almost £26m in its half-year results.

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