John Lewis hires turnaround expert in scramble to revive fortunes
The appointment of a turnaround specialist and serial private equity director as chief executive reveals crisis facing the retailer
THE owner of John Lewis has hired a cost-cutting turnaround expert as its first ever chief executive as chairman Dame Sharon White battles to revive the company’s fortunes.
John Lewis Partnership, which also owns Waitrose, has appointed Nish Kankiwala, the former chief executive and chairman of Hovis to lead the group in a newly-created role.
Dame Sharon said she will work with Mr Kankiwala to ensure “the partnership thrives for another century”, adding that the appointment will allow her to focus on strategy and “big commercial choices”. Mr Kankiwala, who has been a non-executive director of the John Lewis Partnership since 2021, has been described by industry insiders as a “tough leader” who is unlikely to shy away from cost-cutting.
It comes just weeks after the head of the John Lewis department stores abruptly stepped down in a sign of a wider shake-up at the helm. Pippa Wicks was one of Dame Sharon’s first major hires when she became chairman in 2020, and was seen as central to her previous efforts for a turnaround.
Mr Kankiwala stepped down as chief executive of Hovis last year after joining as chairman in 2014. During his time he led a turnaround of the brand and sold it to private equity firm Endless. He was president of Burger King’s international
business for a year from 2004, during which he was also credited for a revival. Mr Kankiwala also headed up Pepsico’s European division for a decade.
One industry insider who has worked with Mr Kankiwala, said he would likely take a “common sense” approach to running John Lewis.
They said: “He sorts things out, he fixes things up. He has a very, very charming personality. But he can be tough if he needs to be. Absolutely he wouldn’t shy away from cost-cutting.”
John Lewis said Dame Sharon would still be “fully accountable for all aspects of the Partnership’s performance, purpose and approach” after Mr Kankiwala steps into the chief executive post later this month.
Dame Sharon said: “Since joining the board in 2021, Nish has developed a deep understanding and appreciation of the partnership model and has provided counsel on our transformation. He will be able to supercharge this in his new role.” John Lewis is facing a battle to get shoppers back into its stores, with a study earlier this year suggesting the owner of the department store chain was on course to fall below Marks & Spencer in the rankings of Britain’s largest retailers as soon as this year.
Clive Black, an analyst with Shore Capital, said: “John Lewis in the past decade has gone from being the best business in Britain to a case study in how not to engage in multiple turnarounds and so time is running out.”
Industry insiders raised doubts over Mr Kankiwala’s retail experience, with one source raising concerns that his background in food and drink would not be enough to steer John Lewis through its turnaround. However, those who had worked with him said he would be surrounding himself with industry experts and making “common sense decisions” on strategy.
Mounting cost pressures pushed the John Lewis Partnership to a £99m loss during the first half of its financial year. It will publish its full-year results today.
Waitrose has seen its market share fall from 5pc to 4.7pc over the past 12 months, according to Kantar.
The Telegraph revealed earlier this month that Waitrose was cutting costs in an effort to free up cash to revamp its stores. It is currently executing a turnaround plan masterminded with American consultants Bain, who Mr Kankiwala worked with while at Hovis.
When an employee-owned partnership at the most cuddly end of the spectrum is in trouble, where would be the best place to go for help? A grizzled and battle-scarred private equity veteran seems like an unlikely source of salvation. It’s a bit like asking King Herod to step in and save the kindergarten from going under.
Nevertheless, that hasn’t stopped John Lewis from doing the unthinkable. Britain’s best-known mutual has appointed Nish Kankiwala, a seasoned turnaround figure and serial private equity director, as its first ever chief executive. In the tradition of most corporate announcements, this is being painted as a perfectly normal turn of events when the impression is very much the opposite.
At the very least it looks like a tacit admission on the part of Dame Sharon White, its chairman, that more help is needed. But it may also be a harbinger of what is yet to come for an organisation that is already in the throes of a pretty fierce shake-up.
Indeed, there are enough red flags in the 200 words that the press release dedicates to Kankiwala’s packed CV to cause John Lewis partners to throw themselves overboard the next time they are allowed on one of the company’s five yachts – that’s if the new boss hasn’t already offloaded them in a fire sale.
Presumably, the repeated mention of his involvement with private equity is meant to be reassuring, but again, it is likely to have the reverse effect.
The scars of Dame Sharon’s unflinching turnaround are still fresh, and three years into a highly ambitious five-year recovery plan that aims to achieve £400m of profit by 20025, staff probably thought, or at least hoped, the worst of the upheaval was behind them.
One in three of its 51 department stores have been axed, thousands of partners shown the door and its bonus is expected to be scrapped again this year. The restructuring has been carried out in the name of cost cuts that give John Lewis a better chance of survival, in that it eases the financial pressure on a business wrestling with a £1.6bn debt pile, £350m of which needs to be paid over the next three years.
But chipping away at the cost base too ruthlessly comes with serious risks. Morale is already close to rock bottom and the scrapping of perks such as its Winter Hill golf course in Berkshire, in a bid to eke out additional savings, risks eroding confidence even further.
Meanwhile, reducing the number of staff in both its department stores and its Waitrose shops is unlikely to do much for John Lewis’s reputation for great customer service, which is probably what has enabled it in the past to stand out from rivals.
The adoption of any of private equity’s tried and tested, yet tired, techniques is unlikely to redress the balance. The industry playbook is one of heavy borrowing – often to the detriment of investment – and aggressive cost cutting.
The trouble is John Lewis has already tried the first two with mixed results so there will be concerns that Kankiwala has been brought in to think the unthinkable and present a compelling case for even more radical action.
His track record will do little to dispel such speculation. Most recently, Kankiwala spent eight years in charge of bakery brand Hovis, where John Lewis credits him with spearheading “the turnaround of a much loved and cherished business”.
A cursory glance at its most recent accounts suggests that may not be strictly true, however. In 2021, the 137-year-old bread maker suffered a 73pc fall in pre-tax earnings from £13.8m to just £3.7m, a reversal blamed on spiralling costs of everything including ingredients, energy and labour.
Still, there can be no questioning the lengths he went to. Pre-tax profits of £27.2m the same year were flattered by a £38.7m one-off gain from the sale and leaseback of the freeholds of three sites in Glasgow, Bradford and Nottingham. In 2018, after registering a near-£12m loss the previous year, and £34m of losses the year before that, Hovis swung the axe in brutal fashion.
The company shut down a loss-making flour mill in Southampton, and offloaded two more in Selby and Manchester to rival supplier Whitworth Bros, leaving it with just one in Wellingborough. Its headquarters in High Wycombe were also trimmed, leading to 100 job losses in total.
Might a similar fate be in store for the venerable John Lewis? Kankiwala was also at the helm when the business was sold to private equity outfit Endless in 2020. Could he prove to be the catalyst for the partnership to seek outside investment as it grapples with evaporating profits and a sizeable debt burden?
Could he go one further and recommend a break-up that sees the department stores separated from Waitrose, yet still somehow preserve its sacred mutual structure? Having also notched up long stints at Burger King, Pepsico and Unilever, he may see more of a future in food than clothing and homewares.
Or might even the partnership itself be reviewed? Dame Sharon says she and Kankiwala will “work closely to ensure the partnership thrives for another century”. Yet, in the following breath, the former civil servant says the new structure will enable her to “focus on the preservation of the partnership model”, which suggests it is facing an existential threat.
These are difficult questions that probably need asking. But having repeatedly got her hands dirty, perhaps Dame Sharon feels they would be better coming from someone else.
‘At the very least it looks like a tacit admission that more help is needed’