Retail

John Lewis looks to private homes to offset high street pain


John Lewis & Partners is to expand its financial services business and venture into housing and horticulture after warning that margins in retail are too thin to sustain the company in the long term.

In a letter sent to the group’s 80,000 staff or “partners”, chair Sharon White said a strategic review, which she launched in March shortly after joining, “should see green shoots in our performance over the next nine to 12 months, and our profits recovering over the next three to five years”.

Dame Sharon has already warned that sales at both the eponymous department stores and the Waitrose supermarket chain are likely to fall this year. She has also announced hundreds of staff cuts at the group’s head office and stated that eight of its 50 department stores will not reopen following the UK’s pandemic lockdown, threatening more than 1,000 jobs.

But in her letter on Thursday she went further, saying that retail profit margins were under pressure and that “for the partnership to be sustainable over the long-term, we need to expand beyond retail”.

“We have the opportunity to offer our customers new services where trust and a strong sense of purpose are important”. These could include using some of the partnership’s significant land and property assets — as well as some freehold stores, it owns a 2,800-acre farm in Hertfordshire, four hotels and various logistics facilities — for private rented housing.

Sharon White says ‘shops will always be crucial to the brand but they will be in support of online’

“We want to put excess space to good social use. We are exploring with third parties the concept of new mixed-use affordable housing,” she said. The group’s former store in Southsea, which it closed last year, is being redeveloped into a hotel and cinema complex.

Richard Lim, chief executive of Retail Economics, said the new ventures risked adding complexity despite a pledge to simplify the business. “But like everybody, they have got too much space and they need to do something else with it.”

The financial service business, run by HSBC under a white-label agreement, will be expanded “significantly” over the next five years. Feedback from staff has also suggested there is an opportunity in horticulture, a highly fragmented sector where the partnership’s existing offerings are disparate and under-developed.

Following the experience of Covid-19, Dame Sharon reiterated that the partnership would become a much more digital business, with around 60 per cent of John Lewis sales and a fifth of Waitrose revenue likely to be generated online in future. Before the pandemic, the proportions were 40 per cent and 5 per cent respectively.

“Shops will always be crucial to the brand but they will be in support of online,” she said. “Over the next five years we expect to rebalance our shop estate so that we have the right space in the right locations.”

Mr Lim said the stores would increasingly be used for WACD — “what Amazon can’t do” — including experiences, product demonstrations and personal shopping services.

As already indicated, the two partnership’s brands will work more closely together, with more Waitrose food in the department stores and John Lewis homewares in the supermarkets.

There will also be improvements to pricing, especially in areas of John Lewis, and better loyalty offerings across both brands. The famed “Never Knowingly Undersold” promise, which dates back to the 1920s, is being reviewed “to ensure we offer fair value for how our customers shop today”.

Dame Sharon said a full update on the conclusions of the review would be given with the group’s half-year results in September.



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