The new boss of the John Lewis department store chain has warned of more job cuts this year and possible price rises as she said shoppers’ behaviour was changing “profoundly and fast”.
Paula Nickolds, who took charge of middle England’s favourite store three months ago, said the department store needed to modernise and become more efficient in the face of rising costs, the move to online shopping and a tough economic environment.
Last month John Lewis, which is owned by its staff, revealed plans to cut nearly 800 jobs in its store restaurants and administration and Nickolds said more jobs would go this year as it automates and simplifies routine processes behind the scenes so that staff can focus on serving shoppers. She declined to say when and where the redundancies would be made, saying staff would be told first.
As part of its efforts to modernise and keep customers coming into stores rather than just shopping from their sofas, Nickolds said the chain would be providing more services – from beauty salons to an appointment system for customers to consult with expert store staff about potential purchases.
Nickolds said the company would not be using more agency workers rather than directly employed staff – who are called partners and who share in an annual profit-related bonus and get a range of other benefits, including access to John Lewis-owned holiday homes.
The cuts come as Nickolds warned that the retailer had started to see signs of uncertainty among its customers about their personal finances in the wake of the Brexit vote. Until now retailers have said there had been little sign of a slowdown in spending.
“Customers are feeling a little less certain of their financial security and that is starting to come through in our conversations [with them],” she said, adding this was likely to continue throughout this year.
Nickolds said the 16% decline in the value of the the pound since the EU referendum had resulted in “a dramatic impact on input pricing”. However, it was not yet clear how much of the cost increases would be passed on to shoppers as price rises partly depended on competitors’ actions. Some retailers are choosing to take a hit on profit and keep prices low to ensure they can keep pulling in shoppers.
“The two most significant concerns over the next couple of years are our trading arrangements and at least as important, and probably more so, is the experience for EU nationals working in John Lewis.”
Less than 5% of John Lewis’s workforce are EU nationals – but that is still up to 2,000 people – many of whom are in the distribution operations which service the retailer’s fast-growing online store.
A tightening of access to workers could fuel wage inflation at a time where John Lewis is trying to cut costs. Nickolds said it was already clear that retail in general would be “a structurally less profitable operation than it was”, with too many stores on the high street and costs rising.
Nickolds, 44, has climbed through the ranks at the retailer since joining as a graduate trainee 23 years ago. She took over the top job when her predecessor Andy Street quit to stand as the Conservative candidate for mayor of the West Midlands.
She added that John Lewis would also be trying to boost sales by merging digital and store-based services. Her plan includes providing John Lewis staff with tablet computers so they can give shoppers information or take payment without visiting a till.
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