Mar 19, 2023
John Lewis May Dilute Historic Partnership Model, Times Reports
John Lewis Partnership Plc is considering selling a minority stake, diluting its employee-owned structure, as the cost-of-living crisis puts pressure on the UK retailer to seek new investment.
The company, which owns the high-end grocery chain Waitrose as well as its eponymous department stores, may explore a change in the company’s mutual structure so it can raise at least £1 billion ($1.2 billion), according to a person familiar with the matter. Fresh funding would go toward better technology and data analysis, as well as the Waitrose supply chain, the person said.
For more than seven decades, John Lewis has been owned by its employees or partners, now amounting to about 80,000 people. Selling a minority stake would require a change to the business’s constitution, which would be voted on by the company’s partnership council, a group of about 60 staff.
The plan is being overseen by Chairman Sharon White, who took the helm in 2020 and has led an overhaul at John Lewis including closing stores, cutting staff and selling assets. The Sunday Times first reported the information.
“We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans,” a spokesperson for John Lewis said in an emailed statement. “Our partners, who own the business, will be the first to hear about any developments.”
Unlike publicly listed companies, John Lewis cannot raise cash from stock markets, and the business has £1.7 billion of net debt with a £300 million bond coming due in 2025.
The move comes after John Lewis last week reported a £234 million loss, canceled its employee bonus for the second time in three years and warned of new job cuts. The company is losing ground to Marks & Spencer Group Plc, which recently reported its best-ever market share in food retailing. M&S replaced Waitrose in a tie-up with Ocado in 2020.
Read more: Tables Turn in the £20 Billion Fight for Britain’s Middle Class
There have already been plenty of changes lately at John Lewis. Last week the company appointed a chief executive officer for the first time in its history. New CEO Nish Kankiwala, who has been on the board for two years, has turnaround experience at breadmaker Hovis and at Burger King. He was appointed after an internal search.
Last month Pippa Wicks, the restructuring expert brought in to revive the department stores, left abruptly after less than three years in the role. John Lewis is seeking a permanent replacement while retail director Naomi Simcock fills the gap in the interim.
One major problem for the chain is its upmarket grocer Waitrose. Sales fell 3% last year as the supermarket chain was slow to cap rising prices and shoppers have decamped to cheaper rivals, including discounters Aldi and Lidl. It has also been beset with availability issues after a problematic roll out of a new tech system and a fire at a depot led to gaps on shelves.
As part of White’s strategy, the retailer is diversifying to gather more revenue from real estate and financial services, with a goal of getting 40% of profits outside the retail sector by 2030. As part of this, John Lewis has teamed up with investment firm abrdn Plc to build about 1,000 new homes in and around London.
“I couldn’t be more confident in the strategy,” White said last week on a call with journalists. “It’s about retail and more.”
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