John Lewis, the beleaguered retailer to middle England, will have to overhaul its business model “at pace”, its new chief executive told employees this week.
The comments by Nish Kankiwala come days after the retailer pushed back against reports that it was exploring a controversial partial demutualisation in an attempt to raise between £1bn and £2bn of new investment, as it grapples with heavy debts and increasing competition from online rivals.
Chair Dame Sharon White and Jane Cheong Tung Sing, general counsel and partnership secretary, said on Monday that an investigation would be launched into sources of leaks to the media relating to plans to sell a minority stake in the employee-owned mutual, which were first reported by The Sunday Times.
The leaks prompted a firestorm of criticism, from politicians, and current and former employees. These included Andy Street, Conservative mayor of the West Midlands and a former John Lewis managing director, who said abandoning the partnership model would be a “tragedy”.
Some employees’ criticism of the retailer’s performance and of White’s leadership were posted on the mutual’s intranet, and these posts were subsequently shared with journalists.
This was “a huge breach of trust . . . as our democracy thrives on open and frank debate”, said White and Cheong Tung Sing.
Kankiwala, who was two days into his role as John Lewis’s first CEO, told staff that “the way the partnership did business would have to change to make it more efficient and affordable, and that action would have to come at pace”, according to an update in the Gazette, the retailer’s weekly internal magazine, seen by the Financial Times.
White has vowed to protect the retailer’s unusual structure, whereby 74,000 staff all own the business, and the partnership would “not only survive, but thrive for another 75 years”.
Management was also asked if John Lewis would stand by its decision to drop its “Never Knowingly Undersold” price promise, a move announced last year. Naomi Simcock, who replaced Pippa Wicks at the helm of John Lewis’s department stores after the latter’s abrupt exit last month, said the move was “the right decision” and “it has allowed it to protect its profits”.
This month, the mutual reported a pre-tax loss, including property writedowns, of £234mn in the year to January 28 compared with a £27mn loss the previous year. Sales fell 2 per cent to £12bn with those at supermarket Waitrose, which accounted for £7bn of the total, down 3 per cent.
It had £1.7bn of total net debt during the year, up from £1.4bn the previous year, but lower than the £2bn seen in 2020. Borrowings of £350mn are due for repayment in the next two years. Total liquidity stood at £1.5bn.
John Lewis said: “Our partnership model is what makes John Lewis and Waitrose special and will always be at the heart of our business.”
It said: “We have kept under review our future funding needs so we have options to fuel the next stage of our growth plan, but nothing is happening in the short term.
“Right now we are focused on continuing to deliver the best possible experience for our customers while improving the performance of our business.”