Transforming Britain's John Lewis could take five years, new boss warns

The new chairman of British retailer John Lewis warned on Thursday it could take up to five years to revive the employee-owned group hit by sliding profits. Sharon White, former head of UK telecoms and media regulator Ofcom who succeeded Charlie Mayfield last month, launched a strategic review as the department stores and supermarkets group reported a 23% drop in annual profit, a third straight fall.

The group also said it would pay its 80,000 workers, which it calls partners, a bonus of just 2% of salary - the lowest since 1953 when it did not pay a bonus. "We need to reverse our profit decline and return to growth," said White.

"This will require a transformation in how we operate as a partnership and could take three to five years to show results." The 156-year old John Lewis Partnership runs the eponymous department store chain and upmarket supermarket Waitrose.

Many British retail chains are going out of business or closing stores in the face of subdued consumer spending and a shift to online shopping. The department store sector has been particularly badly hit. BHS went bust in 2016; House of Fraser was bought out of administration in 2018 by Mike Ashley's Sports Direct, now called Frasers Group; and Debenhams went into administration last year and is now owned by its lenders. White's review will focus on how the group can strengthen its businesses and develop new services outside retail.

It will look at "right sizing" its store estate - currently 50 John Lewis stores and 338 Waitrose branches - through a combination of new formats and new locations; repurposing and space reductions of existing stores; and closures. Three Waitrose stores will close later this year, it said - at Helensburgh in Scotland, Four Oaks in central England and Waterlooville in southern England.

SUSTAINABILITY White stressed at the outset of the review that the group would continue to be an employee-owned partnership and would retain its two brands - John Lewis and Waitrose. She said there would be a greater emphasis on sustainability.

She plans to provide an update on the review when John Lewis publishes first half results in September. Last October, Mayfield announced a new structure for the partnership, bringing the department stores and Waitrose together as one business, run by an eight-member executive team.

The shake-up, which has removed one third of senior management roles, saw the departure of department stores boss Paula Nickolds and her counterpart at Waitrose Rob Collins. It is targeting savings of 100 million pounds. The group reported a pretax profit before one off items and partnership bonus of 123 million pounds ($159 million) in the year to Jan. 25, 2020, down from 160 million pounds in 2018-19.

Gross sales fell 1.5% to 11.5 billion pounds. While core operating profit at Waitrose grew by 10 million pounds to 213 million, it slumped by 75 million to 40 million at the John Lewis chain, reflecting weak sales in home and electricals, investment in technology and higher staff costs.

The group said it was planning for the UK retail market to remain volatile. ($1 = 0.7754 pounds)