John Lewis, though, doesn’t share Next’s optimistic outlook.
The John Lewis Partnership has just reported a £55m pre-tax loss for the first half of this year, after being forced to shut stores during the pandemic.
But if you include £580m of ‘exceptional items’, including the cost of stores closures, restructurings, and redundancies,, the loss swells to £635m.
Ashley Armstrong
(@AArmstrong_says)John Lewis Partnership reports a huge £635 million loss, compared to £192m profit last year, partly due to a major £470m writedown of its stores as online now makes 60% of JL sales. The retailer lost £200m of sales while department stores were shut and had £50m of covid costs
This has forced John Lewis to cancel its partner bonus for the first time in many decades.
New chairman Sharon White told fellow partners that:
The Group found itself in a similar position in 1948 when the bonus was halted following the Second World War.
We came through then to be even stronger than before and we will do so again.”
White also warned that the retailer is still bracing for its worst-case scenario.
In April, we set out a worst case scenario for the full year of a sales fall of 5% in Waitrose and 35% in John Lewis. That remains our worst case view. We now believe the most likely outcome will be a small loss or a small profit for the year.
Retail group Next is bucking today’s selloff, after hiking its profit guidance for the year.
Next now expects to make a pretax profit of around £300m this year, up from the central scenario of £195m given in July.
Next CEO Simon Wolfson says three factors helped Next rise out the Covid-19 crisis. First, it has a strong online business; secondly, demand for homeware items, children’s clothes and leisure wear garments held up relatively well during the lockdown; thirdly, its out of down retail park stores were less affected by the pandemic than high street outlets.
Wolfson told the City that the outlook is still very uncertain:
Standing as we are, in the midst of the pandemic, with no sign yet of abatement or vaccine, it might seem odd that the essential tone of this report is optimistic. Particularly, some might say, coming from NEXT.
But our confidence in the future is not because we see a comfortable route through to the end of the pandemic. The prospects for the next six months remain as uncertain as the outlook for the virus itself; never has our guidance been more tentative or as broad in its possible outcomes.
But in all our guidance scenarios the Group generates a profit, generates cash and reduces its debts.
Shares have jumped over 2% in early trading to over £63 (still down 10% this year).
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The Bank of England has a lot on its plate right now. The economy is emerging from one of its worst slumps ever, a no-deal Brexit could be looming, and inflation has slumped to near zero.
And at noon today, the BoE will reveal its latest monetary policy decision, and update us on its assessment of the economic outlook. It’s likely to be a sobering read, with unemployment expected to nearly double this year.
The Bank could well drop some loud hints that it will launch more stimulus measures soon, especially if Brexit fears grip the economy tighter.
Jim Reid of Deutsche Bank predicts the Bank of England will leave interest rates and its QE programme on hold today, but may act before Christmas:
Our base case is that there’ll be a further £60bn top-up to the QE program in December, though risks are rising that this might be announced slightly earlier at the November meeting. The meeting comes against the backdrop of rising Brexit uncertainty, which will only serve to heighten uncertainty and weaken confidence.
Brexit wasn’t mentioned once in the minutes of the August meeting, but it’ll be interesting to see if this change ….
America’s central bank has already had its say. Last night, the Uederal Reserve said it would keep interest rates at record lows until at least 2023, to ensure that inflation was on track to overshoot its target.
As Fed Chair Jerome Powell put it:
Effectively what we are saying is that rates will remain highly accommodative until the economy is far along in its recovery,
The Fed also raised its growth and unemployment forecasts, suggesting confidence that the economy was healing. It now only expects US GDP to shrink by 3.7% this year, up from a 6.5% contraction before. Unemployment is now seen at 7.6% by the end of the year, down from 9.3%.
You might expect this pledge of even more loose monetary policy to cheer investors and lift risky assets, but US stocks actually closed lower last night, with the Nasdaq losing 1.25%.
Investors were alarmed that Powell warned the US rebound could be at risk without more government spending — a nudge to Congress to end their disagreements over stimulus packages.
Fiona Cincotta of City Index explains:
Stocks sold off and the US Dollar rose following the Fed’s announcement in and risk off move as the market portrayed its frustration at the Fed’s reluctance to offer any more stimulus.
That knocked stocks in Asia, and european equities are also facing losses at the open. The FTSE 100 predicted to fall around 1% – back to the 6,000 point mark.
IGSquawk
(@IGSquawk)European Opening Calls:#FTSE 6020 -0.97%#DAX 13057 -1.50%#CAC 5005 -1.38%#AEX 551 -1.36%#MIB 19698 -1.33%#IBEX 7010 -1.42%#OMX 1819 -1.06%#STOXX 3291 -1.43%#IGOpeningCall
We’ll be tracking all the action through the day, including the latest US unemployment and housing data.
The agenda
- Noon BST: Bank of England interest rate decision
- 1.30pm BST: US weekly jobless figures
- 1.30pm BST: US mortgage approvals and housing starts