What now for John Lewis and Waitrose?
John Lewis Partnership + Other stories that matter
It’s been a bruising few weeks for the John Lewis Partnership and its chairman Dame Sharon White. The employee-owned retailer, which runs John Lewis and Waitrose, is in the uncomfortable position of its internal tensions being played out in public.
Last week the Partnership’s 61-strong employee council voted on whether it supported the recent performance of the business and Dame Sharon as chairman. The council is made-up of elected employee representatives and is just one part of the organisation’s governing structure. It holds votes twice a year but they do not usually attract much attention or end with the results being made public.
Chris Earnshaw, president of the partnership council, said: “Since 1919 the chairman has held sessions with our council to reflect on the performance of the partnership. This is a routine part of our democratic process.”
But these are not routine times for the John Lewis Partnership. There is tension about the underperformance of its brands and the strategies that Dame Sharon seems to be considering. On March 16 the John Lewis Partnership reported an annual pre-tax loss of £234 million and said it would not pay a bonus to its 80,000 staff. John Lewis sales were up 0.3 per cent on a like-for-like basis while Waitrose was down 3 per cent. Just days later, on March 20, The Sunday Times published a well-sourced story which said that the Partnership was looking to bring in an external investor to raise between £1 billion and £2 billion, a move that would dilute its employee-owned structure. That story prompted a backlash internally and externally. The events of March 2023 added to discontent already within the business about the closure of John Lewis department stores in locations such as Birmingham, Peterborough Sheffield and York following Covid-19 lockdowns, as well as other cost-cutting measures
The results of the council vote are not binding. But it is unlikely that Dame Sharon would have survived if she had lost the one about her leadership - the council has three representatives on the board of the John Lewis Partnership.
The council held the vote at its regular “holding to account” event, which took place at the Odney Club in Berkshire, one of the hotels and retreats owned by the John Lewis Partnership.
The retailer has actually published the speech that Dame Sharon made to the council before the vote…
Dame Sharon quoted the author Vivien Greene at the start of the speech
“Life isn’t about waiting for the storm to pass. It’s about learning how to dance in the rain.”
The outcome of the vote was mixed for Dame Sharon, to say the least. Just four of the 55 votes cast were in favour of the Partnership’s performance over the last financial year. The rest of the votes were for “disagreed” or “strongly disagreed”. However, in the other vote on whether staff supported Dame Sharon as chairman, she was strongly backed - 37 of 55 agreed, five strongly agreed and 12 disagreed.
Nonetheless, The Mail on Sunday said in a story at the weekend that the size of the vote against last year’s performance shows Dame Sharon’s future is “now on the line”. Oliver Shah said in his Sunday Times column that Dame Sharon and the John Lewis Partnership “look to be trapped in an unhappy marriage”. He wrote:
Solving the John Lewis puzzle has to involve fixing the core retail businesses. This is granular stuff — store standards, the interaction between physical and digital, stock levels, costs. So far the top team has not come up with a convincing plan.
White and the partnership look to be trapped in an unhappy marriage. The combination of poor performance and rumblings of internal discontent can last for only so long. It’s not easy to see a catalyst for improvement — but, as ever with John Lewis’s labyrinthine governance, it’s also not easy to see how a divorce might be triggered.
There is more criticism of the John Lewis Partnership by a former staff member in The Times today. Neil Stead, who spent thirty years at the retailer according to his LinkedIn profile and helped to introduce the myWaitrose loyalty card before leaving in 2021, said:
“Towards the end of my 30 years, though, I felt the focus had turned to profit and specifically short-term sales. Obviously, I recognise that a business’s success is measured in the profit made, but I’ve always believed that it comes as a result of ensuring your customers and employees come first.”
You can read that story here
Dame Sharon said in her speech that there would be a “gear change in engagement” between management and staff, with more information shared about the retailer’s strategy and the reasons for it. There would be the “ability to track and measure progress”, she added. Dame Sharon also asked for support from staff, saying:
“We now need everyone to be behind the plan.”
She also addressed The Sunday Times story about bringing in an external investor:
“I want to be absolutely categorical. The John Lewis Partnership will always be an employee-owned business. No ifs, no buts. There is absolutely no question of demutualisation. Our model is the very reason I joined the Partnership… They are the very reason our brands are so special.”
However, these comments do not rule out the prospect of an investor being brought in somehow, potentially through a minority stake or a joint venture. As Dame Sharon said, there are “creative ways to bring in equity and investment”, such as the partnerships that John Lewis and Waitrose had with Ocado and Clipper Logistics to expand their online operations. She said:
“Obviously any funding plan has its risks, particularly with all the economic uncertainty that we are still continuing to live with. If at any point the Partnership was unable to fund all our plan through our own means the board could consider external investment. But if and only if that arrangement were consistent and completely aligned with the 1929 and the 1950 trust settlements. If there was any impact on the constitution there would be a role for council in the normal way.”
The John Lewis Partnership is going to be a fascinating story to watch over the next few months. For more on the story and the employee-owned model check out our podcast interview with James Bailey, the boss of Waitrose. You can listen here.
A chart that helps you understand the world…
Currys, the electricals retailer, has said profits for the year to the end of April will be higher than previously forecast thanks to better-than-expected sales in the UK and Ireland. The company said in a stock market statement that adjusted pre-tax profits will be between £110 million and £120 million this year compared to its previous guidance of £104 million. Shares in Currys have risen more than 5 per cent today in response to the statement. However, as the graph above shows, the backdrop to this upgrade is that business has been tough for Currys and shares in the company are down significantly over the last five years. Like-for-like sales in the UK and Ireland are still down 7 per cent year-on-year, despite the upgrade today. Meanwhile, like-for-like sales are also down 10 per cent in Currys’ key Nordics business, which has been hit by a local price war.
You should also read this…
The Canadian investor Brookfield has put Centre Parcs up for sale and wants between £4 billion and £5 billion for the holiday resorts (Financial Times)
A detailed look at the state of the banking industry in the US through a series of charts. The analysis suggests that the recent turmoil for regional banks will not turn into a wider banking crisis (TKer)
A piece from Berkshire Hathaway’s annual meeting and what it was like to hear from Warren Buffett and Charlie Munger in person - and what they said (Behind the Balance Sheet)
The Chinese city of Yichun is dealing with problems that the rest of the country will struggle with soon too - an ageing, declining population and the loss of key manufacturing jobs (The Economist)
Why Leeds protected Victorian back-to-back terraced houses when other parts of the UK got rid of them (Bloomberg CityLab)
Sticking with cities, the Resolution Foundation is hosting an event today looking at how a collection of cities around the world turned themselves around after losing key industries. Some important lessons for the UK here (Resolution Foundation)
The renowned Scottish-based tech investor James Anderson is back. He is going to lead a fund set-up by the Agnelli family and chaired by George Osborne. Anderson was an early backer of Tesla and other US tech firms while at Baillie Gifford but his reputation has taken a hit from the recent sell-off in tech stocks (Financial Times)
Ben Houchen, the mayor of Teeside, faces questions over a deal to sell a vacant steel site to two local developers without a public tender process (Financial Times)
Another independent regional brewery is stopping production due to surging costs. Dawkins Ales in Bristol said it was closing its brewery because it “could not continue against the overwhelming headwinds of spiralling costs alongside post-Covid recovery” (Business Live)
French president Emmanuel Macron is hosting an event for 200 business leaders in Versailles as part of a drive to attract foreign investment (Reuters)
Lastly, check out Off to Lunch’s Sunday press review for a round-up of the news that mattered in the weekend papers. This includes Revolut, Cadbury, Royal Mail and John Lewis. Paid subscribers were sent this on Sunday. You can sign-up to read it and receive it in the future here.
And finally…
Dumfries in southern Scotland hasn’t been renowned for its restaurants in the past but that should change. Home is a restaurant that offers great food at a great price. The restaurant has a seven-course tasting menu for £45-a-head which includes a “steak and lasagne” dish. Grace Dent has just reviewed it for The Guardian. “Home, never change, please,” she writes. “You are authentically, refreshingly perfect.” You can also get a glass of wine for £3.50. Review here
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Best
Graham