Dame Sharon White pledged that the John Lewis Partnership would return to a “sustainable” profit by 2026. This may require outside investments.
White stated that she has “a plan” for her partnership. The partnership reported a loss this year of £234million and canceled its annual bonus. She said that the five-year plan is aimed at “a broad-based business, with brilliant retail as its core, built on quality, ethics, and excellent customer service”.
Yesterday, she told the Employee Ownership Association – which represents employee-owned organisations or those transitioning to employee ownership in the UK – that the plan might require external investment.
White assured his staff that the five year business plan, beginning in 2021, will “get the partnership back on sustainable profit”. White and Berangere Michel (the partnership’s Finance Director) did not mention when the retail group will return to profit at the company’s results for the year in March.
White, 56, is under pressure as his debts, which have risen to £1.7 billion and £350 million in borrowings, are due to be paid back in the next 2 years. Staff pension fund, which manages the nest egg of 74,000 employees, has also gone into deficit due to bets placed on government bonds that cost £2.8 billion.
Outsiders and staff reacted particularly with anger to reports that White considered ending the group’s beloved mutual status after 159 years by raising money from outside investors.
White’s speech sought to assuage these concerns, saying the business will always be employee owned.
She acknowledged that the board could “look at whether external investments were needed” if the partnership, consisting of John Lewis and Waitrose was unable to finance the entire plan on its own.
She said that as an employee-owned company, the partnership had funded itself for many years from cash generated from trading, asset sales and loans.
She added that the partnership plan assumes that this funding method will continue but that “clear risks” exist.
White stated that, while the economic climate “remains uncertain”, and the amount of investment required by the partnership to transform the Waitrose supply chains and invest in technology was “greater” after the rapid expansion of the business and the period of austerity”, he said it would be “tragic to ignore what needs to done to ensure that the partnership has fuel to invest and grow”.
White informed the group that any external investments would need to comply with trust agreements, which ensure employee ownership as well as a share of profits for partners.
She added, “Employee ownership is a given.” What makes us unique is not just because we are a partnership. We are a partnership.
Andy Street, former managing director of John Lewis between 2007 and 2016, stated that it would be “a tragedy” to abandon the partnership model, while retail veteran Mary Portas claimed that this was a precarious situation.
At a meeting held last month to discuss the partnership council, over half of its 61 members delivered a harsh rebuke against White and her leadership. Fourty-one council members, who are employees elected by the workers, disagreed with a proposal that they had “confidence” in the progress made under White’s leadership in the last year in relation to the purposes, principles, and rules laid down in the constitution.
White explained that most of the financial problems of the company were due to the “rapid growth” of the business between 2000 and 2015. During this time, the number of employees grew from 40,000 to 90,000. John Lewis stores nearly doubled, reaching 43 (and 50 at their peak) and Waitrose branches went from 126 up to 336.
The debt ratio increased from 3.6 times to 4.8, and the net debt grew from PS1 billion in the first year to £3.7 billion by the end of the period.
White delivered her speech during a member event of the Employee Ownership association, which was held in the London offices of Arup. Chris Earnshaw, the president of the Partnership Council, is on the board, and John Lewis, a trustee, are also members. Go Ape, Richer Sounds and other not-for profit and politically independent organisations are also members.