Is the crisis over at the John Lewis Partnership? Not yet. A pre-tax profit of £56m was a big improvement from a thumping loss of £234m last time, but remember that the group’s definition of a sustainable annual return is £400m. That isn’t scheduled to be achieved until the financial year that ends in January 2028. There is still a long way to go.
But the state of panic that infected the place a year ago does seem to have passed. Back then, chair Dame Sharon White was scaring everybody with loose talk about bringing in outside investors, which sounded like a threat to the 100% employee-owned model. Such speculative thinking has been canned, thankfully. The balance sheet is in better shape now that cashflow is moving in the right direction. It lends credibility to the claim that the partnership has all the funding it needs to complete the next four years of investment. Good.
Waitrose, despite past IT headaches, remains strong and has reported trading profits up by £170m. Opening a few more stores for the first time in a decade looks like a low-risk use of capital. If the often-promised pan-partnership loyalty card eventually appears, the supermarket side of the business ought to be the main beneficiary.
The bigger concern, as ever, is the John Lewis department stores (plus its website). Sales fell 4% in the year, making boasts about “a record 13.4 million customers” feel irrelevant. More punters buying less stuff is not a winning formula, especially when “home and technology” – two core departments – were the weak elements. New management, in the form of the returning Peter Ruis, has only just arrived, so it’s too early to hear fully formed ideas on efficiencies and staffing levels and so on. But don’t hang about – Marks & Spencer, the most direct competitor, is buzzing.
The key point about the improved balance sheet is that it allows proper sums to be spent on investment again across both sides – £542m is promised this year, a 70% boost from last year’s pauper’s ration. As a whole, the partnership looks to be in more normal operational territory again. White’s final lap as chair – her five-year term ends in February next year – should be less filled with drama. And she surely made the correct call on denying partners a bonus: aside from investment in the business, the priority ought to be basic hourly pay, where, even after a payroll increase of £116m, the group lags behind the rates set by the major supermarket chains.
It’s hard, though, to know what to make of the other half of her plan for revitalisation – the investments in financial services and build-to-rent homes. A target of generating 40% of profits from non-retailing activities by 2030 has been ditched, but could surely have been dropped long before now if the explanation is that inflation and interest rates have changed since 2020.
An open question is whether White’s successor will share her enthusiasm for non-retailing adventures. Financial services shouldn’t be problematic because many retailers, including the mighty Next, run successful credit operations. But building a portfolio of 10,000 buy-to-rent properties looks fiddly and time-consuming work, as the partnership is discovering with planning delays on its three current development sites. A few supermarket chains dabble in residential developments around their stores, but none has taken a plunge on the scale JLP intends. It looks like a distraction. Prediction: the landlord plans will be watered down eventually.
