Retailer John Lewis is considering selling a stake in the business after 73 years of operating as a staff-owned partnership, in a bid to fund the investment it needs to reverse its declining fortunes.
A source familiar with the strategy of the group confirmed that the option of the sale of minority shares in the prestigious high-street brand is now on the table, to inject new capital into department stores and Waitrose supermarkets, which have simultaneously recorded annual losses. each of the past two years.
“We have always said we will seek partnerships to help fund our exciting transformation and growth plans,” John Lewis said in a statement, highlighting deals with Ocado and Abrdn, which are not involved in the sale of equity in the business.
The Sunday Times first reported that the company was looking to sell shares worth between £1bn and £2bn to invest in struggling Waitrose stores as well as build IT infrastructure.
“The business expanded rapidly between 2000 and 2015, going from 151 to 379 stores”, explained chair Dame Sharon White in a letter to partners in January. “We now have the investment to make, and the potential to modernize the business very quickly.”
In response to news of a possible stake sale, one of John Lewis’ former directors told the FT: “They’re not making any effort to grow the business; it’s a recapitalization – they’re running out of money and need cash.
The former director added that the business had received, and rejected, approaches from private equity in the early 2000s, as well as an approach from Amazon to buy Waitrose in 2017.
“I think that Sharon inherited a worse business than she expected”, said the person. “This is demutualization by any other name. If they don’t have to do this, they won’t do it.
Any structural changes to John Lewis require the approval of the chairman, the board and the partnership board – a representative body with members elected from the John Lewis workforce.
But a source familiar with John Lewis’ strategy argued that any sale would be a “demutualisation” – with the employee-owned company restructured into a public company with shareholders – and said investing in the business was “the best way to protect the future. partnership.”
Industry insiders suggested the only investors who could take a stake in the struggling retailer were “long-term investors”, such as sovereign wealth funds.
“The people of Qatar [Qatari Investment Authority] buy shares in Sainsbury’s; I wouldn’t be surprised if people like that are interested”, says former director John Lewis.
Retailers have struggled in recent years to increase sales and keep their cost base down, with White saying “inflation has hit us like a hurricane” on a call with the media last week.
It comes after the partnership reported a pre-tax loss, including property writedowns, of £234 million in the year to January 28 – an increase of £27 million from the previous year.
Sales fell 2 percent to £12 billion with those at supermarket Waitrose, which accounted for £7 billion, down 3 percent. Partnership bonuses for staff were canceled twice since 1953.
The response to the changes expected by John Lewis from retail analysts and veterans was mixed.
Neil Saunders, retail analyst at GlobalData Retail, called the plan to sell shares in the business “half-baked” and “risky”. “It will cause internal division and hurt the partner’s morale at a time when it is very low,” he said.
“It also exposes the partnership to a level of external control that, apart from going against founding principles, may lead to poor short-term decisions and may lead to conflict,” he said.
Retailing consultant Nick Bubb, however, said: “There is a fundamental problem that the business is not making money and, in addition, it cannot provide bonuses and cannot raise money to invest money in the store. Waitrose is starting to look a bit shabby compared to M&S. There are obviously needs to be changed.