09 January 2020 16:36
John Lewis Partnership's outgoing chairman Charlie Mayfield has insisted that the business is pursuing the right strategy despite poor Christmas sales results and the threat once again that it could fail to pay a bonus to its partners (employees) for the first time since 1953. Alongside the trading update covering the seven weeks to 4 January, the company made the shock announcement that Paula Nickolds, managing director of John Lewis & Partners who was due to take up the new position of executive director of brand at JLP, will leave in February when Sharon White takes over as chairman and its new structure, dubbed the "future partnership", comes into effect. Speaking on a call to journalists, Mayfield said Nickolds' exit had been a joint decision and refused to be drawn on who had initiated it. Nickolds has been at the business for 25 years and managing director since 2017. Her counterpart at Waitrose & Partners, Rob Collins, had already announced that he would leave when his current role ceased to exist.
Sales at John Lewis fell 2.3% to £1.13bn over the Christmas period, with a like-for-like fall of 2%. At Waitrose, they were down 1.3% to £1.03bn, but up 0.4% like for like. Waitrose online sales grew by 16.7% and in the week before Christmas were up almost a quarter (23.4%). In a statement, JLP acknowledged that it may opt not to pay a bonus to partners this year, although the decision will be taken by White and the new board in March. Last year's bonus of 3% was the lowest since 1953, the last time no bonus was paid.
Mayfield admitted that John Lewis' "Never knowingly undersold" positioning had an impact on income when many retailers are running big price promotions, but he pointed to the wide divide in the performance of different categories at John Lewis, with beauty sales up 5% and fashion outperforming the market. Asked if he had any regrets about the plans to combine certain functions of John Lewis and Waitrose given the departures of Collins and Nickolds, Mayfield said: "Not at all – the partnership is absolutely behind these changes. "This was not hatched in secret – it was developed by the whole team, including Rob and Paula. It's very easy to overlook some of the care that's gone into its design; we're not just mashing together the two brands in an unthought-through way." The intention of the change was "drawing on the synergy we can get in areas like hospitality", Mayfield said, explaining that it would benefit John Lewis because of the much higher frequency with which customers shop for food than non-food items. He said the awareness of certain services was "way lower than we'd like it to be" – for example, more than 40% of customers are unaware that they can click and collect John Lewis orders in Waitrose. The latest results, Mayfield said, "will simply underline the importance and opportunity" of the changes. JLP confirmed that Craig Inglis and Martin George, currently the customer directors at John Lewis and Waitrose respectively, were staying on as director of customer and director of marketing respectively, as sources told Campaign in October 2019. // John Lewis managing director Paula Nickolds resigns after John Lewis Partnership's Christmas sales drop 1.8% // Like-for-like sales at John Lewis on its own, for the 7 weeks to Jan 4, fell 2.3% to £1.13bn // Waitrose sales drop 1.3% to just over £1bn // Chairman Sir Charlie Mayfield also warns staff may miss out on annual bonuses for the first time in 67 years Paula Nickolds is set to exit the John Lewis Partnership after 25 years following lacklustre sales during the peak Christmas period, especially at the department store she led as managing director. For the seven week period ending January 4, John Lewis Partnership's gross sales were down 1.8 per cent year-on-year to £2.16 billion. For John Lewis on its own, like-for-like sales fell by 2.3 per cent to £1.13 billion during the festive period, while stablemate Waitrose saw its sales drop 1.3 per cent to just over £1 billion as a result of store closures. READ MORE: Chairman Sir Charlie Mayfield, who is due to leave office as well, also warned that John Lewis and Waitrose staff may not receive an annual bonus for the first time in 67 years. Despite the overall declines, the two retailers' online sales were a silver lining among the results. Waitrose online sales increased by 16.7 per cent and in the seven days to Christmas online grocery orders were up 23.4 per cent. On the other hand, John Lewis online sales increased by 1.4 per cent. Nickolds, who was promoted to managing director of the department store in September 2016, is now due to leave office in February after working for the partnership since 1994. In a statement this morning, John Lewis Partnership said her departure was part of the company's management reshuffle and business consolidation, which was first announced last October. Nickolds' resignation also comes just three months after Waitrose managing director Rob Collins – also a longtime partnership employee – stepped down amidst the restructuring announcement in October. John Lewis Partnership's planned restructure consists of integrating the teams behind its two retail brands under one executive team. The £100 million cost-cutting exercise also saw 75 out of 225 head office roles axed, as the company attempted to recover from its first ever half-year loss in September. Nickolds was slated to become the new brand executive director, overseeing both John Lewis and Waitrose in a newly-created role she was due to take up in February. "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," Mayfield said. "At the full year, we expect profits in Waitrose & Partners to be broadly in line with last year. "In John Lewis & Partners we will reverse the losses incurred in the first half of the year, but profits will be substantially down on last year. "We therefore expect that partnership profit before exceptionals will be significantly lower than last year." He added: "The partnership board will meet in February to decide whether it is prudent to pay a partnership bonus. "The decision will be influenced by our level of profitability, planned investment and maintaining the strength of our balance sheet." Mayfield, who first announced his resignation as John Lewis Partnership chairman in November 2018 and will be replaced by outgoing Ofcom chief Sharon White. Click here to sign up to Retail Gazette's free daily email newsletter