Boots and John Lewis Further Aid the Tsunami of Job Losses in Retail Sector

Summary

• Around 5,300 job losses have been announced by Boots, and John Lewis
• Boots would be cutting down 7 per cent of its workforce, reducing its employee count by 4,000
• John Lewis will close eight of its 50 stores permanently, which would result in 1,300 job losses
• High costs, slower growth in sales, lower profit margins and heavy price competition has resulted in low profitability

The Coronavirus pandemic crisis and the long lockdown it triggered, has impacted the whole British economy. Businesses remained shut because of the fear of virus spread, and people restricted themselves to only essentials, leading to mass redundancies across various segments. There is no clarity on the further and more profound impact it will have on the industrial sector. The corporates are adopting all the necessary measures in order to ensure the safety of their customers and employees. The government also come up with the furlough scheme to prevent mass layoffs, securing 80 per cent of salaries to millions of employees; still, various companies are regularly announcing job cuts to safeguard their falling revenues.

On 9 July 2020, Boots and John Lewis announced their plans to cut around 5,300 jobs and close down some of their stores permanently.

Boots, a health and beauty products' brand, would be cutting 7 per cent of its workforce or 4,000 jobs by shutting down 48 optician outlets and reducing its headcount at its Nottingham office. It operates across 2,465 stores. After a plunge of 72 per cent in sales at its main outlet, it has accelerated its restructuring plans. Boots opticians also saw a dive of 48 per cent of its sales on the High Streets as a result of the Covid-19 pandemic.

On the very same day, a brand of high-end department stores, John Lewis announced that it would be closing eight of its stores permanently out of a total of 50 stores. Department stores in Birmingham and Watford would also close with 1,300 job losses. Croydon, Newbury, Swindon and Tamworth, the four At Homes stores of the Group will also be closed down along with two outlets in travel hubs at Heathrow airport and St Pancras station in London.

Though, the company also confirmed that nine of its shops, namely, Aberdeen, Ashford, Brent Cross, Chichester, Oxford, Peterborough, Reading, Sheffield and White City Westfield, would reopen on 30 July. They had closed because of the coronavirus lockdown.

On 1 July 2020, there was an announcement of 6,000 redundancies in the United Kingdom's High Street. Retailers such as Harrods, Philips Green's, Arcadia Group, SSP declared about the cutting down of jobs.

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Burger King, a fast-food chain, also reported shutting down 10 per cent of its UK outlets which could lead to more than 1,600 employees losing jobs. The Celtic Manor Resort in Newport has also announced plans to make 450 redundancies out of its 995 permanent workers.

Factors affecting the Retail Businesses

• The cost involved in running retail outlets such as rents, business rates and labour costs are proving very expensive.
• High costs, slower growth in sales, lower profit margins and heavy price competition has resulted in low profitability.
• Transformation of retail shops into online stores, improper planning, and lack of investment in stores is another factor.
• Coronavirus lockdown has affected the retailers severely. According to the forecast of Centre for Retail Research, 20,622 stores will close down in 2020 (in comparison to 16,073 in 2019), and the job losses will increase to 235,704 people in 2020 (2019: 143,128).

Impact of Online Shopping on Retail Markets of the UK

Online shopping allows customers to review thousands of items in one place and pay for them from the comfort of their homes which has impacted the offline retail companies to stay in the competition with online stores. With the advancement in technology and a recent boom in e-commerce, online retail stores are heading towards establishing their niche. It has become essential for a small business owner to take their business on online platforms to survive in the industry.

Over the last few years, major chains have either ceased their operations or have been cutting costs by paring back their services, because of which many of Britain's shopping streets have started to look lifeless. There are various reasons, but the increase in online shopping is the one considered to be a significant determinant in the decline of the 'high street.'

Many British retailers of High Street are finding it difficult to survive. In 2018 companies such as New Look, Toys R Us, and Maplin went into administration, while 2019 and 2020 saw firms like MotherCare, Debenhams, and Jack Wills, Victoria's Secret following suit. Though some of these still exist in some form or the other, the future of the traditional High Street still looks uncertain.

Let us have a look at the performance of some of the retail stocks on the LSE:

Marks and Spencer Group PLC (LON:MKS)

Marks and Spencer Group PLC (LON:MKS) stock last traded at GBX 96.00 on 10 July 2020, up by 1.18 per cent. The 52-week low price of the stock was GBX 85.04, and the 52-week high price was GBX 228.90. It was having a market capitalisation (Mcap) of £1,850.22 million. The volume traded was 9,019,170 for the day. The company recorded a negative return on price, which was 55.54 per cent on a YTD (Year to Date) basis.

Burberry Group PLC (LON:BRBY)

Burberry Group PLC (LON:BRBY) stock was trading at GBX 1,561.00 on 10 July 2020 at 12:59 PM, down by 0.95 per cent. The 52-week low price of the stock was GBX 1,085, and the 52-week high price was GBX 2,345.00. It was having a market capitalisation (Mcap) of £6,378.19 million. The volume traded was 230,714 so far. The company recorded a negative return on price, which was 28.40 per cent on a YTD (Year to Date) basis.

JD Sports Fashion PLC (LON: JD.)

JD Sports Fashion PLC (LON: JD.) stock was trading at GBX 640.80 on 10 July 2020 at 1:04 PM, down by 1.54 per cent. The 52-week low price of the stock was GBX 293.20, and the 52-week high price was GBX 881.40. It was having a market capitalisation (Mcap) of £6,333.80 million. The volume traded was 501,511. The company recorded a negative return on price, which was 21.72 per cent on a YTD (Year to Date) basis.

Next PLC (LON:NXT)

Next PLC (LON:NXT) stock was trading at GBX 4,684.00 on 10 July 2020 at 1:12 PM, down by 0.34 per cent. The 52-week low price of the stock was GBX 3,390.00, and the 52-week high price was GBX 7,340.00. It was having a market capitalisation (Mcap) of £6,248.62 million. The volume traded was 94,493 so far. The company recorded a negative return on price, which was 32.45 per cent on a YTD (Year to Date) basis.

ASOS PLC (LON:ASC)

ASOS PLC (LON:ASC) stock was trading at GBX 3,301.00 on 10 July 2020 at 1:19 PM, up by 6.01 per cent. The 52-week low price of the stock was GBX 1,050.00, and the 52-week high price was GBX 3,670.00. It was having a market capitalisation (Mcap) of £ 3,106.68 million. The volume traded was 264,409. The company recorded a negative return on price, which was 6.23 per cent on a YTD (Year to Date) basis.

Conclusion

The retail sector is one of the hardest-hit industries of the British economy. Several well-established companies have announced their plans to make a major chunk of their workforce redundant. There is still a sense of insecurity among the customers despite the reopening of the lockdown and the footfall reportedly remained 50 per cent lower year on year during the third week of reopening in England. Now, the vital industry of the UK economy is seeking government support for survival.