John Lewis 'explores plan to change model to raise £2bn investment'

John Lewis ‘explores plan to change its 100 per cent staff-owned model in bid to raise up to £2billion investment’

• Retail giant warned of job losses as staff told it will not be handing out bonuses
• John Lewis Partnership suffered loss of £234m last year as sales at Waitrose fell

John Lewis is reportedly exploring a plan to change its 100 per cent staff-owned model in a bid to attract up to £2billion of investment.

The retail giant, which runs the department store chain and Waitrose supermarkets, last week warned of potential job losses after telling staff it will not be handing out bonuses for just the second time since 1953 due to a hefty loss.

The John Lewis Partnership crashed to a loss of £234million last year as sales at Waitrose fell 3 per cent while revenues at the department store chain were up just 0.2 per cent. 

Overall, it left sales across the John Lewis Partnership down 2 per cent to £12.25billion in the 12 months to January 28. 

Chairwoman Dame Sharon White is understood to now be in the early stages of exploring a plan to change its mutual structure in an attempt to raise between £1bn and £2bn of new investment, The Sunday Times reports.

The retail giant, which runs the department store chain and Waitrose supermarkets, last week warned of potential job losses

The sale of a minority stake could require a change to the John Lewis constitution, which would have to be voted on by its partnership council – a group of about 60 staff.

Any money raised through the selling of shares would reportedly go into the business, rather than into the pockets of staff.

READ MORE: John Lewis and Waitrose staff bonuses axed as as Britain struggle with rising living costs 

 

The John Lewis Partnership is the UK’s largest employee-owned business with its retail brands – John Lewis and Waitrose – owned in trust by its 80,000 partners.

The business was born when John Lewis opened a small draper’s shop on Oxford Street, London, in 1864.

His son, John Spedan Lewis, created the partnership more than 70 years ago as an experiment into a better way of doing business by including staff in decision making.

It now has 34 John Lewis shops, plus one outlet, and 332 Waitrose shops across the UK, along with its retail websites.

Staff at every level of the business, from shelf stackers to senior corporate staff, would receive the same percentage of their annual salary as a bonus.

It included a 20 per cent bonus in 2008 – equivalent to ten weeks of pay – paid as a lump sum. 

But in a letter sent to staff last week, the business said it would not be paying its annual bonus to its staff – who are known as ‘partners’ and effectively own the business – for only the second time since 1953.

And it will have to axe staff as customers cut back on the ‘nice to have’ products that are a feature of its brand.  

Dame Sharon warned of cost cuts, saying: ‘As we need to become more efficient and productive, that will have an impact on our number of partners. That’s a massive regret to me.’

The loss of £234million, compared to a loss of £27million in the year before, was largely driven by a write-down of the value of its stores.

John Lewis Partnership Chair, Sharon White, pictured during a panel discussion at the Confederation of Business Industry in Birmingham in November last year

Taking these out of the equation, the loss before exceptional items and tax was £78million, compared to a £181million profit the year before. 

Waitrose sales fell 3 per cent to £7.31billion while John Lewis sales rose by just 0.2 per cent to £4.9billion. 

However, given an inflation rate of over 10 per cent this represents a disappointing number.

In a letter to staff, White apologised for the lack of a bonus after a ‘tough set of results’.

She said: ‘You’ve been exceptional in what has been another very tough year. Two years of pandemic and now a cost of living crisis.

‘Inflation has had a big impact on the partnership and sent our costs soaring, up almost £180million on last year.’

The update came a day after the group appointed turnaround specialist Nish Kankiwala as its first chief executive, in a shake-up of the leadership structure. 

Mr Kankiwala, a former Hovis and Burger King executive, will take up the role on March 27 and will report to chair Dame Sharon. 

A John Lewis Partnership spokesperson said: ‘We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans. We’ve done this with Ocado in the past and now with abrdn.

‘Our partners, who own the business, will be the first to hear about any developments.’

Head of money and markets at Hargreaves Lansdown, Susannah Streeter, said: ‘The cost of living crisis has been blowing a chill wind through the retail sector but has whipped up a hurricane of problems for John Lewis.

‘Although the High Street has shown pockets of resilience among retailers offering value-for-money essentials, the nice-to-have items which are John Lewis’ bread and butter have been dropping out of shopping baskets.

‘Waitrose, in particular, has been sideswiped by the trend. Shoppers have been putting less in their trollies and decamping to cheaper stores.’

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