John Lewis to focus ‘unashamedly’ on retail as bonus axed again

Plan to make 40pc of profits outside retail led to lack of focus and unhappy customers, writes Hannah Boland

DAME SHARON WHITE has abandoned plans to steer John Lewis away from the high street, as the partnership vowed to “unashamedly focus” on retail.

The shift in strategy was announced as part of its latest results, during which bosses ditched a target to make 40pc of profits outside of retail by 2030.

The mutual also announced that it had returned to profit, but staff were not paid a bonus for the second year running. The John Lewis Partnership, which owns department stores and Waitrose, had previously sought to prioritise rental homes and financial services as part of chairman Dame Sharon’s attempt to transform the business. She had said previously that John Lewis needed to adapt to survive, although she has since rowed back on the 40pc target after claiming the economic environment had changed “so dramatically”.

Dame Sharon said: “The issue with the target is that it was set in October 2020. Inflation was at 2pc, interest rates were at 0pc. We all know the world of the last four years, 11pc inflation and interest rates now 5pc.” The partnership is instead plotting a “relentless focus” on retail in the coming years, with efforts to diversify into other areas viewed as longer term project.

Nish Kankiwala, the chief executive said: “From a commercial perspective, [diversifying into rental homes] is a really important long-term play”.

He said that financial services was “part of supporting our retail business” and was crucial in helping “dampen the cyclicality of the retail sector”.

It means any major drive to prioritise new property schemes or expanding financial services will come after Dame Sharon has exited the partnership. Her term is due to end early next year. The removal of targets came as John Lewis unveiled new plans to simplify the company and invest in a better shopping experience for customers in department stores and Waitrose. John Lewis is expected to cut 11,000 jobs in the coming years. It yesterday confirmed it was likely to have to reduce its workforce, highlighting that there would be less need for some positions under its turnaround.

The partnership posted a pre-tax profit of £56m for the year to the end of January compared with a £234m loss the previous year. It marks the first year it has recorded a profit since the pandemic and comes after revenues rose 2pc to £10.8bn. Despite this, staff were once again told they would not be receiving their annual bonuses, as the company said it “would not be right” to award them a payout. Instead, it said there was a shared responsibility to “ensure the partnership is sustainable into the long-term”. That meant directing investment towards stores and base pay for workers. It marks the second consecutive year staff have not received their partnership bonus and only the third time since 1953.

‘Retailers are eternally dissatisfied people and all of us can see many ways of improving’

‘Focus on outside of retail has been a distraction and parts of core retail have suffered’

When John Lewis released its full year results yesterday, it was keen to prove that it still had an army of loyal customers.

“I love a lunchtime walk around John Lewis,” one shopper said in a video posted by the company alongside its results. “There’s so much colour and the displays are fantastic,” said another. “I like coming to stores and browsing.”

Such sentiment has not been shared by all customers visiting John Lewis and Waitrose stores in recent years. Many who previously saw it as a touchstone in towns and city centres instead complained that shops had become tired and uninviting.

“John Lewis used to be my store of choice as customer service was excellent and buyers did all the hard work sourcing reliable good value goods,” one reader wrote last October when The Telegraph asked for shoppers’ views. “This is no longer the case.”

A former John Lewis executive says: “There’s serious work to be done. The stores really need looking after.”

Shops have become rough around the edges as the partnership directed its focus towards novel business lines such as finance and housebuilding.

Under chairman Dame Sharon White, John Lewis Partnership (JLP), which also owns Waitrose, pledged to make 40pc of profits outside of retail by 2030.

The goal has led to a lack of focus and customers have been losing patience. Marks & Spencer leapfrogged JLP in the rankings of Britain’s biggest shops over the past year, according to Retail Week’s survey last month. Lidl could move ahead of JLP in total sales by early 2028, it warned.

Now, bosses are starting to pay attention. Alongside confirming its first profit since the pandemic hit, JLP yesterday announced a £500m investment plan.

“Retailers are eternally dissatisfied people and all of us can see many ways of improving,” Peter Ruis, the newly hired department store head, told reporters yesterday.

The bulk of JLP’S £542m investment next year will go towards refreshing both John Lewis and Waitrose stores, modernising its technology and simplifying the business. John Lewis will be doubling the size of the beauty hall at its Oxford Street flagship this autumn, just one example of how it will be modernising its estate.

“It’s all about a return of our mojo,” Ruis said.

The former John Lewis executive says: “What these places really have needed is a bit of investment. If you threw some cash back into stores, that’d be great.”

The £542m investment total – which is 70pc higher than the previous year – comes despite the fact staff will not receive their annual bonus for the second consecutive year.

However, Dame Sharon insisted that this was in fact what workers, who are co-owners of the business, want. She said staff were consistently telling executives they wanted more investment in stores and more investment on pay, rather than a bonus.

“We know what partners really want,” the chairman said yesterday. “We are meeting those priorities that partners have set.”

Alongside the higher investment total, £116m will be invested in lifting staff pay.

Implicit in the renewed focus on shops is the fact that other pursuits – from building rental properties to financial services – are taking a back seat.

Nish Kankiwala, who joined as chief executive a year ago, stated clearly that his focus was on retail. Efforts to reinvigorate the department stores are already “bearing fruit”, he claimed.

“This year, a million new customers came through the door and we returned to profit. We see a significant opportunity, which is why we’re doubling down on investment.”

A former senior John Lewis director said the pivot back to retail was “encouraging” and “a step in the right direction”.

Richard Lim from Retail Economic said it was “absolutely the right strategy for them”.

The diversification drive had sparked scepticism from many, including the former John Lewis chief Andy Street who last year said: “I genuinely don’t know why they’ve decided to do that.”

It had also proved difficult: plans to build tower blocks on top of Waitrose stores in London had met with local opposition and been tied up in red tape and consultations.

Lim said: “The focus on other areas outside of retail has been a distraction for them and as a result, parts of the core retail business have suffered.”

John Lewis has fallen behind rivals on pay in recent years: its new entry rate wage is £11.55 an hour, compared to £12.02 at Tesco and £12.40 at Aldi. (John Lewis claims it offers workers “a much broader set of benefits” than rivals and its average for nonmanagement pay will be £12.35.)

Then there were the shops themselves. James Bailey, Waitrose chief, admitted to The Telegraph last year that some of its stores were “terribly organised”.

While JLP is most associated with its department stores, Waitrose has a far bigger footprint: the partnership has 329 Waitrose stores, compared to 34 John Lewis department shops.

The supermarket is expected to be a major focus for spending plans over the coming year.

Eighty Waitrose shops are to be refurbished and new ones will be opened, with both full-range supermarkets and convenience stores planned.

“Our optimism comes from the work we’ve done to work out where those shops will be and how much demand there is out there,” Bailey said. “We believe we’ve got lots of opportunities to reach new customers.”

Dame Sharon said: “We are making progress and turning a positive corner.” Still, she said the partnership was “clearly not complacent” in what it would mean to get more customers back.

“There’s a lot of hard yards to go.”