By Kristy Dorsey
The former bosses of John Lewis and Waitrose are to receive payoffs of nearly £1 million each as the retail group prepares to furlough 14,000 staff and slash hundreds of millions of pounds of spending to combat declining department store sales.
In a trading update to its partners, the employee-owned group said department store sales have fallen by 17% since March 15, following the closure of all 50 John Lewis UK outlets on March 23. Sharon White, who took over as chairman in February, said the group is planning for a worst-case scenario of continued steep declines until June, followed by a further period of weak demand.
The annual report that accompanied the trading update revealed that Paula Nickolds – who was ousted from the business in January after failing to halt a decline in the department store’s performance – will receive a departure payment of £939,773. This is being made in respect of her notice period, contributions towards her legal fees and career development support.
Meanwhile, former Waitrose managing director Rob Collins will receive an £892,362 pay packet following his departure in October. Mr Collins stepped down as part of cost-cutting measures to merge the John Lewis and Waitrose management teams.
READ MORE: John Lewis warns over Brexit as it posts £25.9m loss
Ms White said there was great uncertainty and volatility at the moment, making it impossible to predict the full-year picture for the group’s finances.
“We are therefore looking at a range of different possible outcomes and how these might affect profits, sales and cash flow,” she said. “Over the course of the full year, this worst case would result in a sales decline of around 35% in John Lewis – around double the current level – while at Waitrose it would result in a more modest decline of less than 5%.”
Online sales at John Lewis have surged by 84% since the middle of March, but this has not been enough to offset shop closures. The highest demand has been in areas linked to working and living at home, such as technology, food preparation, children’s entertainment and keeping fit.
“However, these are some of our les profitable lines,” Ms White said. “We are buying more Scrabble but fewer sofas.”
READ MORE: Coronavirus: John Lewis and New Look to temporarily close all stores
In line with other supermarkets, Waitrose has seen a hefty uplift in sales, which are 8% up year-on-year since January 26. Items in highest demand have been cupboard essentials like rice, pasta, long life milk, frozen foods, baking and cleaning products.
Amid strong demand for home delivery, Waitrose has increased its capacity by 50%.Althoug this puts the chain in better stead before its contract with Ocado comes to an end in September, this and other measures such as enhanced safety gear within stores has increased running costs.
Six weeks into the crisis, the group said it continues to hold broadly the same level of cash as it did at the start of the financial year. This includes roughly £900 million in cash and investments, with access to a further £500m of undrawn committed bank facilities.
Independent, non-executive and executive board directors are taking a 20% pay cut from April, which will last for an initial three-month period. This followed a decline in the annual staff bonus to just 2% of salary last year, the lowest award since the group skipped the payment in 1953.
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