‘A stake sale would risk turning John Lewis into AN Other retailer’

The partnership, owner of John Lewis department stores and grocer Waitrose, is considering whether it should seek to sell a minority stake to an external investor to fund investment. That would be a huge break with its trailblazing heritage as a co-owned business.

While John Lewis has occasionally been a bit of a stick-in-the-mud – it was a latecomer to Sunday opening for instance – the retailer has more often been a bellwether and source of inspiration for the industry more widely, frequently revered for its high standards and sustained success.

To dilute the partnership model would potentially undermine the foundations on which that success was built and fly in the face of the group’s fundamental values.

The foreword to the partnership’s constitution states: “The partnership is not driven by the demands of external shareholders. Instead, our council represents the views of all our partners, for whom the business is owned in Trust. Combined with the role of the chair and the partnership board, our three governing authorities are not motivated by short-term profits, but instead are able to take a long-term view, maintaining our financial independence, developing our business and nurturing our distinctive co-ownership model.”

Bringing in external shareholders with their own agenda might put JLP in thrall to exactly such demands of others. While the partnership is having problems now, possible dilution of ownership looks like a response to short-term profitability challenges. And where would it leave financial independence and co-ownership?

It’s true that John Lewis’ structure means it does not have the same financing options as, for instance, a public company. So some might see access to external investment as a small price to pay as JLP chair Dame Sharon White pushes forward with her transformation plan.

“While the partnership is having problems now, possible dilution of ownership looks like a response to short-term profitability challenges. Where would it leave financial independence and co-ownership?”

However, last week’s annual results flagged the partnership’s “strong liquidity and balance sheet”. It has £1bn in cash and short-term investments and £420m in undrawn bank facilities which it said allowed it both to “invest with confidence in our Partnership Plan and meet our obligations”. It has tripled its efficiency savings target to £900m and White said there was a “clear path to profit”.

All of that reinforces the idea that JLP is not reliant on finding further external finance – Retail Week understands that such a course of action has not been decided upon – and therefore should preserve what makes it special.

The retailer has in the past invested in other businesses, as with Ocado, and created joint ventures, as in housing rental with investor Abrdn. Such initiatives, when John Lewis is an active investor, are very different from bringing external investment into the core business.

There are previous examples of retailers with alternative ownership structures taking radical remedial action without losing their unique identities. The Co-op, for instance, navigated an existential crisis a few years back – partly by rekindling the values that originally set it apart. Surely John Lewis, which is in a far less parlous position, could do the same.

That is reliant on its core retail operations firing on all cylinders, rather than the promise of bigger future revenue streams such as housing and financial services. And if the partnership’s structure is what sets it apart, then it should be able to rely on its co-owners – all 80,000 of them – to pull out the stops and drive the business forward. They will be as aware as anyone that, values or no values, a retail proposition must keep customers happy and coming back – otherwise it has no future.

JLP’s first chief executive Nish Kankiwala is about to start and it is incumbent on him, White and the rest of the leadership to stay true to the spirit of founder John Spedan Lewis as well as hone it commercially.

Partners might be demoralised by the lack of bonus, but surely they would rather redouble their efforts than work for a business that would increasingly be just like AN Other retailer.

• Nish Kankiwala – John Lewis Partnership’s first chief executive faces huge challenges