John Lewis new chairman reviews store cuts, staff bonus and link with Waitrose

John Lewis ‘never knowingly undersold’ pledge comes under threat as new chairman reviews store cuts, staff bonus and link with Waitrose

  • John Lewis has committed itself for 95 years to match a rival’s price 
  • But major strategic review will leave ‘no stone unturned’, according to sources
  • The review is likely to look at the number of stores and could result in closures 
  • New boss Sharon White has already ruled out selling the Waitrose chain

The new chairman of the John Lewis Partnership is expected to trigger a review of the company’s ‘Never Knowingly Undersold’ promise as part of a major strategic overhaul this week.

Industry sources told The Mail on Sunday the root and branch review by Dame Sharon White and her recently appointed strategic development director Nina Bhatia will leave ‘no stone unturned’.

For almost 100 years, John Lewis has committed itself – via its famous ‘Never Knowingly Undersold’ slogan – to match a rival’s price if the same product is found to be cheaper elsewhere.

Under threat: The store’s famous pledge to match a rival’s price if the same product is found to be cheaper elsewhere

But the pledge has become more painful to honour as rivals such as House of Fraser and Debenhams have struggled and been forced into dramatic price cuts.

The review is also likely to look at the number of stores operated by 156-year-old John Lewis and could result in closures. 

However, it is understood that White, the former boss of telecoms watchdog Ofcom, has already ruled out selling the Waitrose chain amid fervent speculation in recent days.

White, 52, who was in the running to replace Mark Carney as head of the Bank of England before she took the John Lewis job, will take centre stage on Thursday after only weeks at the chain when she presents full-year results.

She has inherited a fundamental strategic shift ordered by her predecessor Sir Charlie Mayfield just a few months ago to integrate senior management at John Lewis and Waitrose.

When the MoS spoke to senior market sources last week, they criticised the plan, which appears to have left the business in chaos and has resulted in the departure of the company’s two most senior operators, Waitrose managing director Rob Collins and former managing director Paula Nickolds at John Lewis.

Shake-up: Sharon White has taken the top high street job at a torrid time

Shake-up: Sharon White has taken the top high street job at a torrid time

It will ultimately see the two businesses more closely aligned and cut a third of the group’s 225 most senior jobs, saving £100million.

But the boss of one large retailer said: ‘Putting the two businesses together like that is crazy. On paper it sounds like a great way of cutting costs but they are two completely different businesses which need a fundamentally different approach.

‘You need someone who knows what they are doing running the supermarket business and someone running the department store business. At the moment it’s not clear who is doing either.’

One food boss speculated whether it might be ‘sensible’ to try to tempt Collins back into the business, even on a temporary basis.

White has already ruled out selling the Waitrose chain amid fervent speculation in recent days

White has already ruled out selling the Waitrose chain amid fervent speculation in recent days

Retail expert Richard Hyman said a key issue facing White is the question of the annual bonus. He added: ‘There are whispers there might be a bonus but they can’t afford one. It’s as simple as that.’

Retail analyst Nick Bubb said he believed the company ‘might just have the confidence’ to pay a bonus equivalent to 2 per cent of salary.

But, he added, the financial performance for last year was grim with the ‘damage’ to profit inflicted by a poor performance at the John Lewis department store chain.

He forecast profit before tax and exceptional items will be down from £160million to £95 million in the year to January. Deteriorating performance not only wiped out profits in the first half of the year but also dampened morale at the group.

Bubb said, however, he expected profits at Waitrose to be stable.

Staff at John Lewis are referred to as partners because they own the company through a trust. For years they received a healthy annual profit share. But the high street has been battered by the rise of online shopping and left the chain juggling its investment in both online delivery and maintaining stores, blowing a hole in the annual bonus.

The review is likely to look at the number of stores operated by 156-year-old John Lewis and could result in closures

The review is likely to look at the number of stores operated by 156-year-old John Lewis and could result in closures

Hyman said: ‘The numbers this week are going to be dire. The questions are about where Sharon White will take the strategy and the big one is about stores and store closures. She could say it’s too early or she could be really ballsy and ‘kitchen sink’ the business.’

The phrase ‘kitchen sink’ refers to an incoming boss releasing all of their bad news at the same time – rather than over an extended period which can tear morale to shreds.

Hyman added: ‘Sharon is very impressive and she is very bright. But for someone that has never worked in business before this is one hell of a challenge. John Lewis needs some urgent action. It needs to focus on selling stuff because the bottom line at the moment is that it doesn’t make any money.’

On the integration plan he said: ‘Have John Lewis and Waitrose missed out on commercial opportunities because they have been run separately? Yes, I believe they have. My issue is that this integration plan has gone far, far too far. I don’t know anyone that doesn’t think its crazy.’ 

 



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