John Lewis Partnership has scrapped its target of making 40% of its profits from non-retail activities by 2030 as it refreshes its turnaround plan.
The new plan, which is introduced as the retail group revealed it bounced back into profit in its last financial year, “does not set a specific target” on the scale of non-retail activities, such as its efforts to build rental houses and its financial services arm.
Chair Dame Sharon White put the change down to the economic environment. “The target was set in 2020 when inflation was 2% and interest rates zero. We all know the world of the last few years,” she said.
John Lewis Partnership plans to build and rent out 10,000 homes, and has submitted planning applications for sites in West Ealing, Bromley and Reading.
However, last year, advisers warned that it faced “extreme challenges” in making money from its scheme in West Ealing with planning documents revealing the development could result in a negative return of £57m for the business.
White insisted that despite no longer having a specific target on non-retail, she believes both build-to-rent and financial services are “important for the partnership’s longer term profitability”.
John Lewis Partnership unveiled a £42m pre-tax profit before exceptional items in the year to January 27, compared to a £78m loss last year, and chief executive Nish Kankiwala confirmed that it was “absolutely on target” to hit its £400m profit target by 2027/28.
Meanwhile, finance chief Bérangère Michel revealed that through improved cash generation, alongside the £260m it had raised through the sale and leaseback of 11 Waitrose stores and a new loan, its turnaround plan will be self funded.
She confirmed that the business would not have to sell any additional assets or press ahead with its much-criticised plan to sell a stake in the partnership.
“The Partnership is to remain fully co-owned,” said Michel.
Subscribe to Retail Gazette for free
Sign up here to get the latest news straight into your inbox each morning
John Lewis bonus blow
Despite the return to profit, the retail group did not pay out a staff bonus.
White insisted its decision to instead invest both in its turnaround plan and plough £116m into hiking pay were “meeting the priorities” of partners.
She declined to set a timeframe for when the bonus would be reinstated.
“We are still confidently set for a £400m profit at the end of the plan and clearly, the sooner and the more progress we make over the next few years, the sooner we’ll be back to bonus but we’re not setting a specific timeline today,” White said.
The retailer plans to ramp up investment in its turnaround over the next year, with £542m set to be invested, up 70% year on year.
This will be spent on modernising technology, refreshing stores and simplifying how it works.
As part of this it will open new Waitrose stores – the first in almost a decade – and will refurbish a further 80 shops over the next three years
In John Lewis, it plans to add 80 new brands and strengthen its own own-brand, revitalise its home offer, and invest in visual merchandise in stores and technology to improve customer service.
Click here to sign up to Retail Gazette‘s free daily email newsletter
