John Lewis boss be­gins re­vamp to save re­tailer

Dame Sharon’s shake-up in­cludes gar­den cen­tres, on­line ex­pan­sion, rentals and af­ford­able hous­ing

The Daily Telegraph - Business - - Front Page - By Laura Onita and Jon Yeo­mans

THE new boss of John Lewis has launched a rev­o­lu­tion­ary plan to save the re­tailer in which it could open gar­den cen­tres, junk a long-stand­ing price prom­ise and turn depart­ment stores into af­ford­able hous­ing.

Chair­man Dame Sharon White un­veiled the most rad­i­cal pro­pos­als in the chain’s 156-year his­tory in a let­ter to staff, as it bat­tles for sta­bil­ity in the wake of lock­down.

She ex­pects the depart­ment store to be a mostly on­line re­tailer in the fu­ture with 60pc of goods sold over the in­ter­net, up from 40pc be­fore Covid struck. Its net­work of more than 40 stores is to be rel­e­gated to a sup­port­ing role. The firm’s Never Know­ingly Un­der­sold prom­ise to match the low­est price of­fered by ri­vals – in­tro­duced in 1925 – is un­der re­view and could be dropped.

In her let­ter to staff, Dame Sharon said: “We have a real op­por­tu­nity to up­date our pur­pose so that it res­onates with to­day’s cus­tomers and part­ners.”

Dame Sharon is also launch­ing a push into ser­vices, with plans to let cus­tomers rent prod­ucts in­stead of buy­ing them, and a ma­jor ex­pan­sion of the com­pany’s fi­nance arm, which of­fers credit cards. It could also buy up or open gar­den cen­tres and cre­ate a mar­ket­place for sec­ond-hand goods.

Ar­guably the most rad­i­cal pro­pos­als are plans to turn empty sites into af­ford­able hous­ing, with the mu­tual po­ten­tially be­com­ing a land­lord. The chain is now in talks with po­ten­tial part­ners about this scheme.

John Lewis is shut­ting eight of its 50 depart­ment stores to save costs, in­clud­ing a sprawl­ing 250,000 sq ft site in the cen­tre of Birm­ing­ham.

Dame Sharon said: “As we re­pur­pose and po­ten­tially re­duce our shop estate, we want to put ex­cess space to good so­cial use.”

The up­date fol­lows months of de­lib­er­a­tion about how to re­turn the loss­mak­ing depart­ment store chain to its for­mer glory, and help sis­ter busi­ness Waitrose cap­i­talise on the boom in home de­liv­er­ies since lock­down. For­mer top civil ser­vant Dame Sharon launched the re­view in March along­side a new team of ex­ec­u­tives, shortly af­ter she took charge of the busi­ness.

The chair­man has given her­self and the 80,000 staff a year to start see­ing progress in trad­ing, but warned that it could take up to five years for prof­its to re­cover. The busi­ness has £2.4bn of debt and its struc­ture makes it im­pos­si­ble to raise cash by sell­ing new shares.

Like al­most ev­ery other player on the high street, John Lewis is bat­tling a cri­sis that has tur­bocharged shop­pers’ stam­pede to buy over the in­ter­net. Part of Dame Sharon White’s re­sponse is straight out of the in­dus­try play­book. More shops could close, she said, sell­ing on­line is cru­cial and the grand old depart­ment chain will aim to do more of it. No sur­prises there.

But that is where nor­mal­ity ends. Dame Sharon is clearly will­ing to try a raft of un­con­ven­tional ideas in her bat­tle to rein­vig­o­rate the chain – from be­com­ing a res­i­den­tial land­lord to stock­ing sec­ond-hand items.

There is even a plan to dou­ble-down on gar­den­ing in the chair­man’s man­i­festo – the most pop­u­lar idea with John Lewis em­ploy­ees.

And mixed in with the bold new strat­egy is talk of pro­mot­ing equal­ity and sus­tain­able liv­ing – no­ble aims that in­dus­try ob­servers stressed will only be achiev­able if it is matched by a fo­cus on max­imis­ing in­come.

“Hor­ti­cul­ture, where did that come from? Haven’t they got enough prob­lems? It is a bit bonkers,” said Richard Hyman, an in­de­pen­dent re­tail an­a­lyst. “In or­der to have the per­mis­sion to have a green, sus­tain­able agenda, in line with the tra­di­tional John Lewis val­ues, you have to be able to drive rev­enues.

“That gives you the per­mis­sion to de­velop those val­ues. If your busi­ness faces an ex­is­ten­tial threat you need some com­mer­cial solutions first and fore­most.”

The plan is in stark con­trast with the com­pany’s de­ci­sion to sell 1,200 acres of land as part of its Leck­ford Estate in Hamp­shire to a pri­vate buyer ear­lier this year, just be­fore Dame Sharon took over.

The deal was part of an £18m trans­ac­tion, ac­cord­ing to Com­pa­nies House ac­counts doc­u­ments for one of its sub­sidiaries, which also in­cluded a pre­vi­ous prop­erty sale.

While the mu­tual has had some sup­port from ex­ter­nal ad­vis­ers, most of the pro­pos­als were a crosspol­li­na­tion of ini­tia­tives put for­ward by sup­pli­ers, its staff and cus­tomers. Hyman thinks an un­usual plan to turn stores into af­ford­able hous­ing is wel­come, given that John Lewis was al­ready plan­ning to shut­ter shops be­fore coro­n­avirus. Like many of its peers, the mu­tual has al­ready ad­mit­ted to hav­ing too much space.

It is also plan­ning to beef up its credit arm to ease the pres­sure on its own finances. John Lewis had al­ready been qui­etly ramp­ing up mar­ket­ing of loans, for­eign cur­rency and pet and wed­ding insurance in its depart­ment stores and su­per­mar­kets, as well as on­line, last year. Its on­line am­bi­tions to turn both John Lewis and Waitrose into a “dig­i­tal first” busi­ness will re­new spec­u­la­tion that the top brass might have to con­sider a takeover or merger to guar­an­tee suc­cess. Dame Sharon has ruled this out in the past. She ex­pects the su­per­mar­ket chain to go from 5pc to 20pc of sales on­line.

“That’s a hell of a jump – are they go­ing to go to bed with some­one else?” a gro­cery source said. “That im­plies a lot of fur­ther [store] clo­sures.”

Dame Sharon un­veiled her plans only in­ter­nally, leav­ing spec­u­la­tion to run ram­pant in the gos­sipy re­tail in­dus­try. An in­sider said th­ese plans are just the first step in a bid to res­ur­rect the busi­ness, and she will put for­ward a more com­pre­hen­sive strat­egy in the au­tumn.

This gives enough breath­ing space to a string of new ex­ec­u­tives – in­clud­ing James Bai­ley at Waitrose and Pippa Wicks at John Lewis – to po­ten­tially come up with their own rad­i­cal ideas or re­ject ex­ist­ing ones.

Either way, it will not be the tra­di­tional depart­ment store as we know it.

Sharon White, the John Lewis chair­man, ex­pects the depart­ment store to be­come an on­line re­tailer with shops in a sup­port­ing role

Dame Sharon White has a rad­i­cal plan

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