Plans by loss-making retailer John Lewis to end more than seven decades as a 100% employee-owned business have drawn criticism from an MP and supporters of its mutual ownership model.
Sharon White, who chairs the company behind the eponymous department store chain and Waitrose, believes the business could raise up to £2bn in new investment by diluting its mutual model, according to reports.
Details emerged after John Lewis said on Friday it would have to cut jobs and scrap its regular staff bonus for only the seventh time since 1953, after falling to a worse-than-expected £230m annual loss.
While the proposals to raise new money are said to be in the early stages, proponents of the mutual model warned against watering down more than 70 years of 100% employee ownership.
Labour’s shadow trade minister Gareth Thomas said the proposal was “very worrying” and reflected Britain’s failure to expand the “permanent capital” model that British building societies can use to raise funds.
He said the model was used in Australia, allowing economic investment from an outside investor without affecting mutual ownership, calling on the Treasury to extend the option to firms other than building societies.
Mutuo, which advocates for cooperative business models, called reports of John Lewis’ plan “shocking”, and backed Thomas’s call for legislation to allow mutuals to raise money without diluting employee-ownership.
John Hawksworth, former chief economist at accounting firm PwC, said moving away from mutual ownership would be “terribly short-sighted”.
Terribly short-sighted idea – demutualisation destroyed the building societies that tried it and would probably do the same for John Lewis, once the epitome of the good employer in the UK consumer services sector. Of course they face challenges but this is the wrong road to take. https://t.co/Q8LiQZMQ3T
— John Hawksworth (@jhawksworth5) March 18, 2023
A spokesperson for John Lewis Partnership said: “We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans.
“We’ve done this with [grocery delivery service] Ocado in the past and now with [investment firm] Abrdn. Our partners [JLP’s term for staff], who own the business, will be the first to hear about any developments.”
Under the proposals being considered by White, the Sunday Times reported, an investor could take a minority stake, with the retailer’s “partnership council” of about 60 staff having the final say.
John Lewis has struggled since the pandemic, amid a broader shift from the high street to online shopping, while the cost of living crisis caused by high inflation has driven consumers into the arms of discounter rivals, White said last week, as the company reported heavy losses.
The group reported an underlying pre-tax loss of £78m in the year to 28 January, compared with analysts’ expectations of £50m and an £181m profit a year before.
Write-downs of the value of Waitrose stores after poor trading took the overall loss to more than £230m.
