In addition to the many pressures in the UK retail market, John Lewis is facing a business rates bill of around £57.4 million in the current year – a significant burden for a department store chain of less than 50 shops.
According to research from real estate firm Colliers, the retail chain will have to pay 30% more than before the 2017 business rates revaluation.
The bill is due to rise further to £59 million next year, putting an additional strain on the company, which welcomed its new chairman Sharon White this week.
The controversial business rates are charged on commercial properties like shops, offices, pubs, warehouses and factories. Criticised for giving online retailers an unfair advantage, many industry experts have called on the government to reform the system in light of the sector’s struggles.
Colliers said some of John Lewis’s stores are facing enormous bills. The brand’s Oxford Street store, for example, is facing a bill of around £10.4 million this year, and a further 20 stores are paying rates bills of more than £1 million each in the 2019/20 tax year.
Some of the most expensive locations are in Bristol, Cambridge, Southampton, Nottingham, Manchester, Birmingham, Leeds, and Milton Keynes.
John Webber, head of business rates at Colliers International, said: “The increasing shift to online shopping, rising costs, including the rise in the minimum wage and dampened consumer confidence are all taking their toll on traditional department stores and John Lewis is no exception.”
“Whilst John Lewis is currently negotiating with landlords over the rents and even the service charges that it pays, one area of costs — business rates — is set in stone, and there is no room for manoeuvre. And bills are likely to continue to rise over next year too,” he added.
After a 2% drop in sales, the retail chain has warned that its full-year profits will be significantly lower than the £160 million reported last year.
In a bid to save money, the company is restructuring its corporate layers, reconsidering its Christmas advertising spend and evaluating the annual bonus.
The next business rates revaluation comes into effect in 2021, and that should give the company some reprieve in financial year 2021/22.