John Lewis targets £400 million profit, signals return of staff bonuses and ditches Never Knowingly Undersold next year

The John Lewis Partnership today set out an ambitious path to turn the struggling department stores and supermarkets business around and make annual profits of £400 million in five years.

The project, led by chairman Sharon White and strategy chief Nina Bhatia, includes finding £300 million of savings and investing £1 billion into improving its online business. Profits last year were £123 million and this year the group expects barely to make breakeven due to Covid-19 lockdowns.

Part of the plan includes replacing the “Never Knowingly Undersold” price promise next year.

Bhatia said: “We’ve shown during the pandemic how quickly we can adapt and make things happen. We showed that when we tripled Waitrose online capacity in just six months.” The company is planning to push into new areas such as teaming up with property companies to build affordable rental flats around stores where it has the freehold and then furnishing them with John Lewis homewares.

Renting furniture and financial services are other areas White and Bhatia are looking to expand. Bhatia said: “Profit margins in these new areas are more significant [than in retail]. We want to change the margin structure of the business over the long ter

Cost-cutting would include far more efficient buying from suppliers who sell John Lewis and Waitrose £10 billion of goods a year. More crossover in sales between Waitrose and John Lewis will also generate more sales.

White has shut eight stores and closed an HQ office in London’s Victoria. Job losses so far this year total 1350. No more store closures are planned. Staff — known as partners in John Lewis-speak — have been told they are not getting a bonus until profits reach £150 million and its debt ratio falls below four times that. Last year the debt ratio was 3.9 times. On today’s new targets, the group aims for profits of £200 million in two years.

As Tesco and others come under pressure to pull out of banking, Bhatia and White are going in the other direction, investing £100 million to quadruple John Lewis’s financial services arm.

Bhatia cited savings products and investments such as junior ISAs. “Products that help families manage their finances is our real heartland.”

Greg Lawless, analyst at Shore Capital, said: “It sounds promising but a lot of it you wonder why they haven’t done it earlier.”

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