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Posts tagged John Lewis
Waitrose launches UK brand expansion and plans more foreign outlets
Mar 14th
Managing director Mark Price aims to keep fast-growing upmarket grocer ahead of rival M&S
Waitrose boss Mark Price is drawing up plans to transform the upmarket food chain into a consumer brand available in thousands of non-Waitrose shops in the UK and overseas. He believes the Waitrose label has the potential to be a big “fmcg” – fast moving consumer goods – name like Heinz or Kellogg’s, which he can sell to other retail businesses, rather than just direct to shoppers.
He has similar ambitions for the Duchy Originals brand, founded in 1990 by the Prince of Wales. Waitrose signed a licensing deal with the struggling royal label last autumn, which gives the John Lewis-owned grocer the right to manufacture, distribute and sell all Duchy goods in the UK. Price said there would be more than 300 Duchy products by the end of the year and there was potential for many more.
He said: “What we are trying to do is give access to the brand and it is not just about owning shops. It is about taking a creative approach and making products available to as many people as possible. We are looking to work with partners.”
The plan to sell Waitrose goods in other stores will be kickstarted this month when Price unveils details of a deal that could eventually see Waitrose food sold in more than 700 Boots outlets. Sections of Boots’ stores will be transformed into mini-Waitroses, with the grocer’s own fixtures, fittings and signage. In return, Waitrose will sell a range of Boots health and beauty goods in its own stores.
Last year Waitrose defied predictions it would be battered by the recession and emerged as the fastest-growing big grocer, chalking up a sales increase of more than 11% to in excess of £4.5bn, trouncing upmarket rival Marks & Spencer. “We expect to be the fastest growing again this year,” Price said.
Sales to overseas supermarkets are also to be ramped up. “Waitrose is seen as a really premium brand outside the UK,” said Price. The grocer has already more than doubled business-to-business overseas sales to more than £100m over the past two year, exporting to 25 countries including Thailand, the Bahamas, India and China. But Price said there was much more potential.
The grocer is also keen to open more franchised outlets overseas, especially in the Middle East. Two stores in Dubai are chalking up 60% annual sales growth and franchises have been awarded for Bahrain, Oman and Abu Dhabi. Price said there would soon be 20-23 Middle East outlets.
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Mutualisation: The John Lewis state | Editorial
Mar 12th
One can see the politicians’ train of thought: John Lewis is popular; therefore this policy will be popular
The middle classes’ favourite shop, John Lewis, had a good day yesterday. Sales up. Market share up. Profits up. And a £151m bonus shared between 70,000 members of staff, or partners as they are known. Not bad during a recession. But a decent business performance is not the main reason that this retail group gets its own series on the BBC or a consistently good press (try to imagine the 10 o’clock news indulgently showing happy investment bankers jumping with joy over their bonuses; yet that is practically an annual event with John Lewis). Nor is it the company’s high-quality Waitrose food or extensive range of linen; no, it is its organisational makeup.
As a company owned by its workers, John Lewis has always been a curiosity in big business. Yet after a historic crisis in the business world, there is a distinct appetite for greater diversity in the ways companies are set up. Treasury ministers and officials have discussed fostering the creation of more building societies as a counterweight to a banking sector increasingly dominated by a handful of huge names. Vince Cable is now calling for Northern Rock to be turned into a mutual rather than flogged to investors. These interesting ideas reflect a realisation by politicians and civil servants that employee-owned firms are not the Soviet kolkhozes of lazy stereotype, but are valid forms of commercial enterprise. The problem comes when politicians talk about applying the John Lewis model to NHS hospitals or inner-city schools.
Both Conservative and Labour have been guilty of this over the past few months. In government, Tessa Jowell has commissioned research to explore the idea of workers and users part-owning public bodies. For the opposition, George Osborne has rolled out the policy of teachers and doctors running their schools and hospitals.
One can see the politicians’ train of thought: John Lewis is popular; therefore this policy will be popular. But even if we overlook the vague announcements (teachers having more say over their workplaces, which is what is sometimes talked about, is a great idea, but it is not mutualism), there are big problems with the very idea of a John Lewis state. Even nice bourgeois retail chains are in the business of making a profit; the NHS is not. Public sector organisations should be accountable to the taxpayer; an architects’ firm need not be. Turning public services into co-operatives opens them up to the risk of being run by profit-seeking companies. Having more mutuals in the private sector would be a fine thing, but before politicians import the John Lewis principle into the public sector they should probably shop around a bit more.
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John Lewis shares £151m in bonuses with staff
Mar 11th
• Department store and Waitrose profits up 9.7%
• All grades of staff receive payout worth 15% of salary
More than 70,000 staff at the John Lewis Group have been handed a bonus equal to nearly eight weeks’ pay after the department store and Waitrose supermarket chain posted a near-10% rise in profits.
The £151m bonus payout comes after a storming year for Waitrose and a big rebound in the fortunes of the 29 department stores, which were badly battered by the recession early last year.
The payout is equal to 15% of salary, and all permanent staff, from the postroom to the chairman, get the same level of reward. Last year they received 13%, while in 2008, before the recession set in, they earned 20%.
The scale of the payout was unveiled in stores all over the country at 9.30am. In the Oxford Street store 1,000 staff hung over the balconies to hear a countdown by the store’s boss, Noel Saunders.
“I didn’t expect 15%,” said Ali Cook, a manager in the beauty department. “We had to work really hard and pull together to achieve this.”
Marcelo Cueva from Ecuador, who works in the postroom as an administration assistant, said: “I’m going to pay off my debt and have a bit extra for a holiday in Italy.”
The department store chain’s managing director, Andy Street, intends to spend his payout on a modern landscape painting.
The full-year profit, at £307m, was 9.7% ahead of 2009 and the results represent a U-turn since the half-year stage, when group profits were down 20% and the department stores were down more than 50% as homeware sales collapsed. Homewares generate a third of John Lewis sales and a bigger proportion of profit.
The group chairman, Charlie Mayfield, said Christmas spending had been much more robust than economists and commentators had predicted. The department stores recorded their best ever festive sales, with Oxford Street taking twice the normal £1m-a-day before Christmas. Some 400 head office staff were sent out to the stores to help with the push.
Total department store sales, which went from gloom to boom over the year, climbed 4.3% to £2.9bn. Underlying profit rose from £154m to £193m.
At Waitrose sales climbed 121% to £4.5bn, defying predictions that the upmarket grocer would be hit by the recession. Underlying profit was up 31% to £280.3m.
Waitrose was the fastest-growing big grocer last year, with sales driven by its new Essentials range of basic foods. The label now covers 1,400 items, generated £500m of sales in its first year and the managing director, Mark Price, said 60% of the trade is incremental. The chain has also opened more stores and has ambitious plans for more outlets, in locations ranging from motorway service stations to the Middle East.
Both arms of the business have focused on cutting costs. Street said the department store chain employs only 22 fewer staff than a year ago – but that figure includes hundreds of staff recruited for a new department store in Cardiff and its new-look homewares outlet in Poole. There have been redundancies among backroom staff in stores and at a distribution centre in Stevenage. Street refused to rule out more job losses this year, saying cost saving was “absolutely an ongoing process”.
He said changing shopping habits, with more sales online, meant job losses, and new recruitment, were inevitable: “It is not about cuts, it is about a change in the nature of employment. There will be some groups of partners who cannot go on doing the jobs they are doing now, and our partners understand that.”
Price said Waitrose has taken costs out of the grocer’s supply chain, but insisted it had not put pressure on suppliers to cut their prices: “We don’t squeeze suppliers. We work collaboratively with them to find mutual advantage for both.” Many suppliers, he said, had been able to reduce their prices as a result of the larger orders being placed by the growing business.
The grocer’s operating margin – a key measure of efficiency – is now 6.2%, up 96 basis points on a year ago and better than Morrisons, Tesco and Sainsbury’s.
Mayfield said the first five weeks of the new financial year had been good, with like-for-like sales at the department store up 15% on a year ago and Waitrose up nearly 3%. However, he is cautious about the outlook for the rest of this year and seemed to accept that the VAT rate was likely to increase from its current 17.5% level later this year, in the wake of the general election: “If VAT goes up, it is generally unhelpful to retailers, but the economy is facing a real challenge and whoever is in government will have to face that.”
Leader comment, page 34 →
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At John Lewis, ‘happiness’ beats profit | Julia Finch
Mar 11th
Middle England’s favourite retailer is employee-owned and takes good care of its staff, but it isn’t the country’s best-run business
There was clapping and cheering and whoops of delight in John Lewis department stores and Waitrose supermarkets the length of the country this morning. Middle England’s favourite retailer was unveiling its annual profits, and said it had made enough money in the teeth of the worst recession since the second world war to pay an annual bonus equal to 15% of salary to its 70,000 staff. They will all get the same percentage – from chairman Charlie Mayfield, down to sixth-formers who spend a few hours each weekend stacking shelves in Waitrose.
The egalitarianism at John Lewis is a refreshing change at a time when “bonus” has almost become a dirty word, conjuring up images of overpaid corporate executives and obscenely rewarded bankers for whom a £1m handout is small change.
But then, the structure of the John Lewis organisation – as an employee-owned partnership – is a concept at odds with all other ownership structures, from tightly controlled family firms to private-equity backed businesses and stockmarket-listed companies. Instead of profits flowing to the shareholders, at John Lewis they flow to the staff, in the form of the annual bonus.
It is therefore in the interests of the staff, at John Lewis, more than anywhere, to keep sales and profit motoring.
The structure has other advantages – the business can wait far longer for a return on its investments than listed companies, which have to answer to demanding City shareholders.
This is an organisation with a formal mission to maximise the “happiness” of its staff – certainly not an aim that staff at many other companies, like British Airways, might recognise.
John Lewis staff are paid no more than shopworkers at rival chains – but the year-end bonus is a significant top-up. Its directors, on the other hand, are paid substantially less than their boardroom counterparts in businesses like Tesco, Marks & Spencer and Sainsbury’s.
It is a business that still operates a final salary pension scheme, which these days are as rare as four-yolk eggs. While other companies – like Barclays bank, for instance – have been closing their defined benefit schemes (but maintaining bumper payouts for its strutting investment bankers), John Lewis is reducing the period staff have to wait to sign up to the scheme from five years to three years. What’s more, it is non-contributory – paid for entirely by the company.
The retailer also provides employee perks – worth £70m this year – ranging from holiday homes to sailing clubs, theatre outings, theme park entrance, and even a choir, all subsidised.
There is a staff council – for ideas and complaints to filter up to the board – and a weekly magazine where staff can sound off about policies and management, anonymously if they choose.
Little wonder, then, that John Lewis staff stay with the business twice as long, on average, as other high-street workers. The consequence of longer service – and a direct link between profits and the cash they will earn – is reflected in the knowledge the staff have and levels of customer service. That, in turn, is what regularly leads to either the department store chain or Waitrose being named as the UK’s favourite shop by the Which? consumer organisation.
If it sounds like a sort of worker heaven, it shouldn’t. Ask those made redundant in the past year, and they might have other ideas. John Lewis boss Andy Street was trumpeting today that the chain has just 22 workers fewer than it did 12 months ago. But it has more stores – which have recruited many new staff. Others, in warehouses and back-room jobs, have been “let go”. More will be heading for the exit this year.
One of the most senior executives in the business, a John Lewis veteran of 30 years, was shown in this week’s BBC2 fly-on-the-wall documentary making some very politically incorrect statements. The business made decisions too slowly and its costs are too high, he said. Worse still, he suggested it was “unsustainable”. Since the documentary was made he has taken early retirement.
But he is not wrong. John Lewis is not the best-run business in Britain. Its a crude comparison, but fashion group Next makes much higher profits from half John Lewis’s sales. The much-derided Marks & Spencer made double John Lewis’s profit last year, from sales 20% higher.
But should “best-run” be defined by how much profit is generated? Unfortunately for John Lewis, accountants can’t put a value on staff “happiness”.
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At John Lewis, ‘happiness’ beats profit | Julia Finch
Mar 11th
Middle England’s favourite retailer is employee-owned and takes good care of its staff, but it isn’t the country’s best-run business
There was clapping and cheering and whoops of delight in John Lewis department stores and Waitrose supermarkets the length of the country this morning. Middle England’s favourite retailer was unveiling its annual profits, and said it had made enough money in the teeth of the worst recession since the second world war to pay an annual bonus equal to 15% of salary to its 70,000 staff. They will all get the same percentage – from chairman Charlie Mayfield, down to sixth-formers who spend a few hours each weekend stacking shelves in Waitrose.
The egalitarianism at John Lewis is a refreshing change at a time when “bonus” has almost become a dirty word, conjuring up images of overpaid corporate executives and obscenely rewarded bankers for whom a £1m handout is small change.
But then, the structure of the John Lewis organisation – as an employee-owned partnership – is a concept at odds with all other ownership structures, from tightly controlled family firms to private-equity backed businesses and stockmarket-listed companies. Instead of profits flowing to the shareholders, at John Lewis they flow to the staff, in the form of the annual bonus.
It is therefore in the interests of the staff, at John Lewis, more than anywhere, to keep sales and profit motoring.
The structure has other advantages – the business can wait far longer for a return on its investments than listed companies, which have to answer to demanding City shareholders.
This is an organisation with a formal mission to maximise the “happiness” of its staff – certainly not an aim that staff at many other companies, like British Airways, might recognise.
John Lewis staff are paid no more than shopworkers at rival chains – but the year-end bonus is a significant top-up. Its directors, on the other hand, are paid substantially less than their boardroom counterparts in businesses like Tesco, Marks & Spencer and Sainsbury’s.
It is a business that still operates a final salary pension scheme, which these days are as rare as four-yolk eggs. While other companies – like Barclays bank, for instance – have been closing their defined benefit schemes (but maintaining bumper payouts for its strutting investment bankers), John Lewis is reducing the period staff have to wait to sign up to the scheme from five years to three years. What’s more, it is non-contributory – paid for entirely by the company.
The retailer also provides employee perks – worth £70m this year – ranging from holiday homes to sailing clubs, theatre outings, theme park entrance, and even a choir, all subsidised.
There is a staff council – for ideas and complaints to filter up to the board – and a weekly magazine where staff can sound off about policies and management, anonymously if they choose.
Little wonder, then, that John Lewis staff stay with the business twice as long, on average, as other high-street workers. The consequence of longer service – and a direct link between profits and the cash they will earn – is reflected in the knowledge the staff have and levels of customer service. That, in turn, is what regularly leads to either the department store chain or Waitrose being named as the UK’s favourite shop by the Which? consumer organisation.
If it sounds like a sort of worker heaven, it shouldn’t. Ask those made redundant in the past year, and they might have other ideas. John Lewis boss Andy Street was trumpeting today that the chain has just 22 workers fewer than it did 12 months ago. But it has more stores – which have recruited many new staff. Others, in warehouses and back-room jobs, have been “let go”. More will be heading for the exit this year.
One of the most senior executives in the business, a John Lewis veteran of 30 years, was shown in this week’s BBC2 fly-on-the-wall documentary making some very politically incorrect statements. The business made decisions too slowly and its costs are too high, he said. Worse still, he suggested it was “unsustainable”. Since the documentary was made he has taken early retirement.
But he is not wrong. John Lewis is not the best-run business in Britain. Its a crude comparison, but fashion group Next makes much higher profits from half John Lewis’s sales. The much-derided Marks & Spencer made double John Lewis’s profit last year, from sales 20% higher.
But should “best-run” be defined by how much profit is generated? Unfortunately for John Lewis, accountants can’t put a value on staff “happiness”.
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All John Lewis staff to share £151m bonus pot
Mar 11th
Staff bonus amounts to 15% of basic salary and is higher than last year
The John Lewis Partnership has handed an annual bonus of £151m to its staff after enjoying a near-10% rise in profits.
The group, which operates 224 Waitrose supermarkets as well as 29 department stores, announced profits, excluding bonuses and tax, of £306.6m this morning.
The John Lewis group is a partnership owned by its 69,000 permanent staff, and everyone – from the chairman Charlie Mayfield and the managing director Andy Street down to shelf-stackers – get the same percentage payout.
The higher-than-expected staff bonus amounts to 15% of basic salary, equal to nearly eight weeks’ pay. Last year workers received 13%, while in 2008, before the recession set in, they were handed 20%.
At the half-year, the group’s profits were down 20% and would have been far worse without its upmarket Waitrose chain, which defied expectations that shoppers would defect to cheaper rivals during the downturn.
Waitrose introduced an Essentials range of basic foods which was popular with shoppers, and has been the star performer among grocers over the past year. Last week, its managing director, Mark Price, said that he aimed to double sales to £10bn in a decade.
The John Lewis chain also had big expansion plans, but has ditched its goal of opening 10 new department stores because of the recession. Instead, it is launching smaller John Lewis at Home stores in retail parks. The first, opened in Poole last October, has beaten its targets and a second is planned in Croydon. Two more were approved last week, and if they also perform well, a further 50 will be rolled out.
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Profits bloom at John Lewis with growth spurt from Waitrose
Mar 7th
Department store group John Lewis expects to reward its employees with a bonus worth about seven weeks wages after bumper trading in second half
The John Lewis group is expected to hand an annual bonus worth more than seven weeks’ pay to its workforce this week as the retailer celebrates record trading over the past six months.
The group, which operates the Waitrose supermarket chain as well as department stores, will report full-year profits on Thursday that are expected to be far better than even its most optimistic executives had hoped.
The exact level of the staff bonus will not be finally agreed until a board meeting in London on Wednesday, but it is expected to be about 14% of basic salary. Last year the 70,000 staff received 13%, while in 2008, before the recession set in, they were handed 20%.
The John Lewis group is a partnership owned by its workers, and all staff – from the chairman Charlie Mayfield down to Saturday shelf-stackers – get the same percentage payout.
Nick Bubb, retail analyst at Arden Partners, said that the group “had a fantastic second half”.
At the half-year, the group’s profits were down 20% and would have been far worse without Waitrose, which defied predictions that shoppers would defect to cheaper rivals in the downturn. However, the 27-strong John Lewis department store chain was battered by the recession. Profits crashed more than 50% as sales of big-ticket items such as furniture all but dried up.
Bubb reckons profits over the past six months have been a third up on last year’s levels and that the group is likely to record pre-tax profits of about £315m, up from £280m last year.
Waitrose has been the star performer in the grocery business over the past year as shoppers snapped up its Essentials range of basic foods. Last week, the grocer’s managing director, Mark Price, said that he aimed to double sales to £10bn in a decade.
The John Lewis chain, however, also had big expansion plans, but has been forced to abandon its goal of opening 10 new department stores as a result of the recession.
Instead, the managing director, Andy Street, has started launching smaller John Lewis at Home stores in retail parks. The first, in Poole last October, has beaten all targets and a second is planned in Croydon. Two more were approved last week, and if they are a success, a rollout of up to 50 such outlets will follow.
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Football joins the mutual admiration society
Mar 7th
Sport is following business and the public sector in taking a co-operative approach
The Red Knights say if they buy Manchester United, the club’s supporters trust will be centrally involved in running the club. If so, they would follow a well-trodden path. In the UK more than 160 clubs are owned by fans outright. They include Exeter City, Brentford – where Greg Dyke is chairman – and AFC Telford, which has won plaudits for becoming a “delivery partner”, helping the local council meet social inclusion and health targets.
Football has become an outrider for the remutualisation of Britain. Supporter trusts generally inherit clubs whose balance sheets are parlous and are, in effect, owners of last resort. Despite this, they place the teams on a sure financial footing while playing an important role in the community. But they often have difficulties competing with bigger clubs, which borrow huge amounts to pay transfer fees and wages.
Football is reeling from how short-term greed took precedence over sustainability – best exemplified by Portsmouth, whose fate currently hangs by a thread. And for football, read the broader economy. With the public’s trust in politicians, financial institutions and regulators eroding, the co-op movement believes that after years in the doldrums, this is its moment.
Around the country there are success stories, from the resurgence of John Lewis, an employee-owned company which has seen increases in revenue and market shares, to the restoration of the Co-op supermarket chain as a force in British retailing. Last year the Co-op completed the £1.57bn acquisition of Somerfield, and is increasing revenues, as the first major retailer to embrace the fair trade model.
Leisure operator GLL started in 1993 after Greenwich council, forced to impose 30% cuts, handed its facilities to a not-for-profit trust. Now, it is the biggest provider of municipal sport facilities within the M25, with more than 250,000 members.
Mutual societies are spreading to the public sector. In 2002, Labour created foundation trusts to run hospitals. Advocates argue this represents a coming together of staff and patients to improve services. The government is also behind plans to take the co-op model to schools. There are currently 40 in existence, with 200 planned by the end of the year.
The Co-operative party, the political arm of the Co-operative movement, is campaigning for the co-op model to be rolled out to social care, the Sure Start early years scheme and social housing, in a move that supporters argue would stop businesses profiting from public services.
The party is also behind a campaign that would see Northern Rock, currently owned by the government, converted into a mutual. It believes the government must resist siren voices in the City calling for a quick sale to the private sector, as that would leave the taxpayer out of pocket.
The Conservatives are also keen to champion employee-owned co-operatives to run chunks of the public sector. But critics point out that the last Tory government passed legislation that allowed for the demutualisation of dozens of financial institutions and argue that they do not fully understand the sector.
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UK’s recovery is ‘false dawn’
Mar 3rd
Head of John Lewis retail chain warns that optimism after strong reading in key PMI service-sector survey may prove short-lived
Britain’s emergence from the deepest recession since the war was a “false dawn,” and paying the costs of the crisis would put the brakes on recovery, John Lewis’s chairman, Charlie Mayfield, warned today.
As a key survey of the services sector suggested a strong bounce last month, after activity was depressed by the snowy weather in January, Mayfield told reporters at a retail conference in London that there would be no return to the heady days of the consumer boom.
The upmarket retailer had a successful Christmas, and Mayfield said it would report a “strong set” of annual results next week. But he warned that growing optimism about the outlook was misplaced.
“I think we’re in a bit of a false dawn, I’m afraid to say … Getting out of the crisis has cost an eye-watering amount of money and we simply haven’t started to pay the price for that,” he said. “Everyone wants to think it’s going to return to how it was two years ago. It’s not going to happen.”
His comments came after analysts seized on news that the monthly purchasing managers index (PMI), compiled by the Chartered Institute of Purchasing and Supply to measure service-sector activity, jumped to 58.4 in February from 54.5 in January – the strongest reading in more than three years.
With services accounting for more than three-quarters of gross domestic product (GDP), City experts said the upbeat reading was welcome news, after a string of poor data suggested the blizzards put the economy into the deep freeze in January.
“It’s a staggering rise, which suggests the services sector in the UK is in rude health,” said David Page at Investec. The survey helped to boost the pound on the foreign exchanges. By the end of the day, sterling was up more than 1% against the dollar, at $1.51.
Vicky Redwood of Capital Economics said that, together with strong growth in manufacturing and construction last month, the services outturn pointed to robust overall growth of 1% in the first three months of 2010. “At the very least, the survey will ease concerns that the economy may have fallen back into recession this quarter,” she said.
A positive quarter of growth in the first three months of the year would come as an immense relief to Downing Street. Statisticians are due to publish their first assessment of GDP for the first quarter in late April, likely to be the middle of a general election campaign, and news of a “double dip” could rock Labour’s claim to have nursed the economy back to health.
The details of the PMI report were also encouraging: a sub-index measuring new business increased to 57.5 from 53.4, the highest since September 2007. Job prospects also improved, with the employment reading the highest since the start of the recession in spring 2008.
But Colin Ellis, an economist at Daiwa Capital Markets Europe, cautioned against reading too much into one month’s data, pointing out that PMI surveys had pointed to a rapid recovery in 2009 which never materialised. “The bottom line is that the PMIs have not been a particularly good guide to activity during the recession so far,” Ellis said. The latest figures for the final quarter of last year show that GDP growth was 0.3% – stronger than first thought, but still half the economy’s long-term average rate.
The Bank of England’s nine-member monetary policy committee will complete its monthly interest rate-setting meeting tomorrow. Few City experts expect any change from its stance of “pausing” quantitative easing at £200bn, and keeping borrowing costs on hold at a record low of 0.5%.
“With a massive fiscal retrenchment also in train after the election, the UK economy is definitely not out of the woods yet,” Ellis said, “and today’s data is certainly not a good reason for the MPC to change monetary policy tomorrow.”
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At John Lewis, ‘happiness’ beats profit | Julia Finch
Mar 11th
Posted by Julia Finch in Business
No comments
Middle England’s favourite retailer is employee-owned and takes good care of its staff, but it isn’t the country’s best-run business
There was clapping and cheering and whoops of delight in John Lewis department stores and Waitrose supermarkets the length of the country this morning. Middle England’s favourite retailer was unveiling its annual profits, and said it had made enough money in the teeth of the worst recession since the second world war to pay an annual bonus equal to 15% of salary to its 70,000 staff. They will all get the same percentage – from chairman Charlie Mayfield, down to sixth-formers who spend a few hours each weekend stacking shelves in Waitrose.
The egalitarianism at John Lewis is a refreshing change at a time when “bonus” has almost become a dirty word, conjuring up images of overpaid corporate executives and obscenely rewarded bankers for whom a £1m handout is small change.
But then, the structure of the John Lewis organisation – as an employee-owned partnership – is a concept at odds with all other ownership structures, from tightly controlled family firms to private-equity backed businesses and stockmarket-listed companies. Instead of profits flowing to the shareholders, at John Lewis they flow to the staff, in the form of the annual bonus.
It is therefore in the interests of the staff, at John Lewis, more than anywhere, to keep sales and profit motoring.
The structure has other advantages – the business can wait far longer for a return on its investments than listed companies, which have to answer to demanding City shareholders.
This is an organisation with a formal mission to maximise the “happiness” of its staff – certainly not an aim that staff at many other companies, like British Airways, might recognise.
John Lewis staff are paid no more than shopworkers at rival chains – but the year-end bonus is a significant top-up. Its directors, on the other hand, are paid substantially less than their boardroom counterparts in businesses like Tesco, Marks & Spencer and Sainsbury’s.
It is a business that still operates a final salary pension scheme, which these days are as rare as four-yolk eggs. While other companies – like Barclays bank, for instance – have been closing their defined benefit schemes (but maintaining bumper payouts for its strutting investment bankers), John Lewis is reducing the period staff have to wait to sign up to the scheme from five years to three years. What’s more, it is non-contributory – paid for entirely by the company.
The retailer also provides employee perks – worth £70m this year – ranging from holiday homes to sailing clubs, theatre outings, theme park entrance, and even a choir, all subsidised.
There is a staff council – for ideas and complaints to filter up to the board – and a weekly magazine where staff can sound off about policies and management, anonymously if they choose.
Little wonder, then, that John Lewis staff stay with the business twice as long, on average, as other high-street workers. The consequence of longer service – and a direct link between profits and the cash they will earn – is reflected in the knowledge the staff have and levels of customer service. That, in turn, is what regularly leads to either the department store chain or Waitrose being named as the UK’s favourite shop by the Which? consumer organisation.
If it sounds like a sort of worker heaven, it shouldn’t. Ask those made redundant in the past year, and they might have other ideas. John Lewis boss Andy Street was trumpeting today that the chain has just 22 workers fewer than it did 12 months ago. But it has more stores – which have recruited many new staff. Others, in warehouses and back-room jobs, have been “let go”. More will be heading for the exit this year.
One of the most senior executives in the business, a John Lewis veteran of 30 years, was shown in this week’s BBC2 fly-on-the-wall documentary making some very politically incorrect statements. The business made decisions too slowly and its costs are too high, he said. Worse still, he suggested it was “unsustainable”. Since the documentary was made he has taken early retirement.
But he is not wrong. John Lewis is not the best-run business in Britain. Its a crude comparison, but fashion group Next makes much higher profits from half John Lewis’s sales. The much-derided Marks & Spencer made double John Lewis’s profit last year, from sales 20% higher.
But should “best-run” be defined by how much profit is generated? Unfortunately for John Lewis, accountants can’t put a value on staff “happiness”.