Britain’s John Lewis, Co-op lament supply chain disruptions

September 16, 2021

By James Davey

LONDON (Reuters) -British retailers John Lewis Partnership and the Co-operative Group both warned that creaking supply chains would lead to higher prices on Thursday, as a dearth of truck drivers compounds disruption in global freight trade.

A combination of the impact of Britain’s exit from the European Union on cross-border trade and the wider effects of the COVID-19 pandemic on worldwide transportation has led many retailers to highlight the challenges facing their businesses.

Although the employee-owned John Lewis Partnership, which runs John Lewis department stores and supermarket chain Waitrose, returned to a first half profit after a pandemic hit loss last year, it warned of “significant uncertainty” ahead.

“Like the whole of retail, we are managing global supply chain challenges and labour shortages. We are seeing inflationary pressures, which we expect to persist,” the John Lewis Chairman Sharon White said.

She said the group was taking a range of measures to mitigate these risks and deliver Christmas for customers, including a campaign to recruit more drivers, the recruitment of 7,000 temporary seasonal workers and booking additional freight.

The Co-op, which runs Britain’s sixth largest supermarket group and also provides funeral and other services, reported a first half loss and warned supply chain disruption would put pressure on full year profit.

CEO Steve Murrells joined industry calls for heavy goods vehicle (HGV) drivers to be added to the shortage occupation list so foreign workers can help plug a shortage of 90,000.

“This won’t be solved in isolation, this is a global issue where the supply chain has completely broken down,” he told Reuters.

Murrells welcomed Wednesday’s announcement that minister Michael Gove will lead the British government’s response to the crisis.

BIGGEST TEST

John Lewis made a first half profit before exceptional items of 69 million pounds ($95 million), versus a loss of 55 million pounds in the same period last year, helped by 66 million pounds of cost savings and business rates relief of 58 million pounds.

Sales rose 6% to 5.87 billion pounds, with department store sales up 12% and Waitrose’s sales up 2%.

“We have faced our biggest ever test and we will come through stronger,” said White, who set out a five-year recovery plan last October.

This involves investing 1 billion pounds to expand its online business and improve its stores, diversify beyond retail and seek more partnerships.

The plan, which is also seeking efficiency savings of 300 million pounds a year by 2022, targets profit of 400 million pounds by year five.

The Co-op made an underlying operating loss before tax of 15 million pounds ($21 million) for the 26 weeks to July 3, versus a 56 million pound profit in the same period last year.

The group has struck a partnership deal with Amazon that will allow Prime members to buy Co-op products on the Amazon site for home delivery.

The Co-op is targeting a more than doubling of online sales to 200 million pounds by the end of the year.

The group has also extended its partnership with Starship Technologies, the delivery robot company, which allows the delivery of groceries in as little as 20 minutes.

($1 = 0.7239 pounds)

(Reporting by James Davey; Editing by Sarah Young, Guy Faulconbridge and Alexander Smith)

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