John Lewis, owner of Waitrose, talisman of the British middle class and go-to for wedding gifts and Comte, is having a tough year. A brand which prides itself on hiring staff for life is bidding goodbye to its chair, Dame Sharon White, just five years into her first term.
So what? Whether White was right for the role is one question facing the board. The other is more existential: how can the partnership, with a governance model built on democratic consensus, move fast and raise capital in an era when retailers increasingly look like tech companies?
The task of appointing a successor will be led by Rita Clifton, deputy chair and former chair of Interbrand. Candidates will need to demonstrate
- Experience. Critics say White’s Achilles heel was her lack of experience in the private sector, having previously held roles as chief executive of Ofcom and permanent secretary to the Treasury. The next chair needs deep knowledge of retail and how to raise money. The business reported a loss of £234 million last year and White’s mixed messaging about plans to consider outside investment cost her. “Probably the biggest misstep of her tenure was kite-flying the idea of selling equity and diluting the partnership model,” says Patrick O’Brien, director of retail research at GlobalData. “That lost her the remaining credibility she had with a lot of partners.”
- Thick skin. The media has not been helpful. During White’s tenure it unfairly linked the partnership’s problems to her background in Whitehall rather than retail. The press quotes anonymous partners opposed to change and outside capital, while at the same time giving heaps of coverage to the fact a Black woman was running the company.
- Fighting spirit. JLP’s closest competitor, M&S, climbed into the FTSE 100 this year on the back of strong Christmas and clothing sales. Under CEO Stuart Machin, it has capitalised on the demise of Debenhams and House of Fraser, revamping space and investing in tech. “Where M&S have stood apart from JLP is this relentless focus on their digital proposition, leveraging the benefits of the loyalty scheme and its data to enhance the lifetime cycle of their customer,” says Richard Lim, Chief Executive at Retail Economics.
- Confidence in retail. There’s no denying White was dealt a rotten hand. She joined in the same week Covid was first reported in the UK. Until that point bricks and mortar had been the partnership’s focus, rather than online shopping. White culled 16 out of 50 John Lewises, delivered news that annual bonuses would be cut, and dropped the slogan “never knowingly undersold” as inflation kicked in. All were inevitable. But the diversification away from core retail now looks like a mistake. The partnership’s plan to build 10,000 buy-to-let homes ran headlong into planning regulations. One scheme to build 400 flats above a Waitrose in Ealing could deliver a negative return of £57 million.
Since White appointed Nish Kankiwala as a chief executive, it’s assumed the chairmanship will now become non-executive. Still, attracting senior talent in the sector could prove tricky. Running a business with such cast-iron ethics is admirable, but comes with unique challenges.
Pay. JLP’s constitution states that “the pay of the highest paid Partner will be no more than 75 times the average basic pay of non-management Partners”. White chose to keep her pay at £990,000 in 2022. For comparison, David Potts, the Morrisons CEO who is pitched as a potential successor, received almost £4.2 million in compensation in 2021. Outsourcing low-paid workers is one way to change the arithmetic, but even then can it be enough to seduce a retail veteran?
Responsibility. Plenty of non-execs like the idea of employee-ownership in principle but baulk at the reality of being answerable to an elected partnership council. Cost-of-living pressures and the backlash against ESG have also added to the difficulties of running a responsible business. That said, Arup Group, the second largest company in the UK to be entirely employee-owned, posted robust revenue growth last year.
JLP’s problems are by no means terminal. Joint ventures, such as the one with Google, are one way of attracting capital but are, in effect, “a step on a ladder to climb down”, according to O’Brien. In the end, the only option left may be to water down some of the partnership’s mutualist commitments in exchange for investment.
White was unable to negotiate that trade-off and her successor needs to approach it with candour and can-do. John Lewis’s reputation and business model are at stake.
