John Lewis is finally doing the right thing by focusing on retail but dithering has been costly

Staff look likely to pay a heavy price as their bonus is once again shelved and redundancies loom

When Dame Sharon White was parachuted into John Lewis she was full of novel ideas about how to expand John Lewis beyond its retail roots. She envisaged a push into garden centres, second-hand clothes and a foray into the burgeoning rental market.

It was billed as the most radical shake-up in the retailer’s 156-year history. But with plans to also turn vacant department stores into affordable housing, ramp up its financial services offering, and its “never knowingly undersold” price pledge prepared for the chop, the impression was of a hurriedly drawn up list of ideas rather than a coherent strategy.

In fairness to Dame Sharon, there was logic to some of it, particularly the move into social housing, which was part of a cunning plan to bolster the balance sheet with higher property valuations.

But with her now promising to focus “unashamedly” on trying to improve its core retail business after the partnership swung back to profit, staff are being denied a bonus again so that more money can be channelled into its neglected stores.

This is undoubtedly the right move, but employees who are missing out on pay are entitled to wonder if that decision should have been made from the start instead of being distracted by a series of new ventures that were either going to take years to bear fruit or fail altogether. That’s not to say that turning round John Lewis was ever going to be an easy job – far from it. As Dame Sharon has pointed out, she inherited an organisation that continued to borrow heavily to open big high street department stores at a time when internet shopping was booming.

Dame Sharon then had to contend with the pandemic just months after taking charge. For John Lewis, it was a brush with death. That it managed to survive partly thanks to a not-entirely deserved £58m business rates freebie from the Chancellor after hundreds of Waitrose stores were allowed to remain open throughout lockdown, underlined the impact.

At the same time, Covid also gave Dame Sharon the cover needed to close 16 loss-making stores, make thousands of redundancies and axe the hallowed staff bonus. Deemed so untouchable, her predecessors had paid it out of borrowings. But a pledge to simplify the company and invest in a better shopping experience for customers, sounds like an admission that the search for new sources of revenue has undoubtedly come at the expense of its department stores and grocery shops.

The question is what has prompted a decision to “unashamedly focus on investing back into our retail businesses”? It plans to refurbish 80 Waitrose stores and open new supermarkets in some areas at the same time as investing in technology to improve the John Lewis website and customer service.

Could it be growing discontent among the workforce that has prompted a sudden change of direction? With staff being denied a bonus again and the prospect of heavy job losses hanging over them, emotions are running so high that some staff were recently threatened with disciplinary action over “unacceptable comments” left on its internal intranet. As the company said, there is no place for abuse. However, employees are certainly entitled to wonder whether they have paid a heavy and unnecessary price for the management’s floundering, particularly with Dame Sharon stating a return to profitability will allow it “to increase investment in our retail businesses”.

There are undoubtedly bright spots such as a 5pc increase in turnover at Waitrose to £7.7bn, but this was almost cancelled out by a 4pc fall in revenue at the John Lewis department stores, meaning sales overall notched up just 1pc to £12.4bn.

With progress slow, losses totalling nearly £800m over the previous three years, and outside investment not an option at Britain’s biggest employeeowned organisation, the cash to revamp stores is coming from a giant £900m cost-cutting drive, partly financed by redundancies and a prolonged bonus freeze.

There has been no staff bonus for three years out of the last four. The group is also reportedly mulling a big cut to the workforce, which could see as many as 11,000 people lose their jobs across the group’s head office, department stores and supermarkets in the next five years. Meanwhile, redundancy payments are being halved with bosses claiming it needed to make the policy “more affordable” and “free up cash”, and there is even the prospect of hundreds of staff going on strike as the GMB union prepares to ballot workers over a possible walkout. The thought of picketing workers at middle England’s most storied retailer would have been unthinkable until recently.

Could this pain have been avoided if management had been more focused on trying to recapture some of the magic that once made both its department stores and its supermarkets a special place to shop? As retail consultant Mary Portas put it, the impression was that senior management thought the struggle was “purely financial”.

John Lewis is keen to stress that retail has always been the real focus and side projects never amounted to much. Dame Sharon points out that 95pc of the investment they’ve made over the past four years has been into retail. Yet, in 2020 a target was set for 40pc of profits to come from non-retail ventures by the end of the decade and that has now been dropped.

She attributes this to higher inflation and the end of cheap money. An alternative explanation is that some of the big ideas have been a costly distraction from the real problems.