Dame Sharon White has been forced to delay her turnaround plan for two years. Photo: Jason Alden/Bloomberg Finance
John Lewis plans to sell as many as a dozen Waitrose stores to raise up to £150 million as the troubled department store seeks new funding for its turnaround.
The partnership will start selling next week 12 supermarkets under sale and leaseback scheme to raise new funds.
It is understood that the Waitrose sites are mainly located in the south of England, where property values are highest, and will have 20-year inflation-adjusted leases. which means that supermarkets will continue to operate at website prices.
Sources said the deal was an opportunity for the retail giant to test the market as it looks to extract more money from its prized assets.
It is the John Lewis Partnership, which owns both the department store and the store. The supermarket chain is struggling to restore business after a recent series of losses.
The group lost a further £59m in the first half of this year and chairman Dame Sharon White was forced to delay her turnaround plan for two years. years, saying John Lewis no longer expected to return to “sustainable profits” by 2026.
Dame Sharon vowed the company would make annual profits of £400 million by that date, but has now admitted that the goal will not be achieved until 2028.
She also blamed rising inflation for the poor results. like the need to invest more in the business to improve performance. The retailer has also been hit by an increase in shoplifting, with it losing an extra £12 million to thefts this year.
As an employee-owned partnership, John Lewis's ability to raise money is more limited than its rivals , and the partnership already has net debt of £1.7 billion.
Dame Sharon was considering allowing private investors to buy a stake in the partnership. earlier this year as part of a fundraising effort, but has since ruled out the option due to backlash.
Property is the largest asset on the partnership's balance sheet at £6.7 billion. Its stores were worth £2.9 billion at the end of last year. The partnership owns 35 department stores and 329 Waitrose stores.
Sale and leaseback deals allow the group to retain its stores but still benefit from the value of the property.
Such agreements are not uncommon in the industry . Both Asda and Morrisons have completed sales and leasebacks since their takeover by private equity.
However, the deals weakened the company's balance sheet and were criticized by labor unions. GMB has previously described Asda's sale and leaseback deals as “nothing short of an asset stripper”.
Commercial property firm CBRE is acting as agent in the Waitrose sale and leaseback deal, which was first reported by Bloomberg. John Lewis declined to comment.
Waitrose has been the focus of John Lewis' turnaround efforts this year as senior managers admitted the mid-range supermarket was being run far less efficiently than its rivals. Staff have been told they need to be more flexible with their shift patterns and warned they could face job cuts if they do not.
James Bailey, chief executive of Waitrose, told the Telegraph last week that the partnership plans to invest to his division to improve productivity.
He said: “The partnership is in a position where it can reinvest in this retail property from now on and we have some really big, well thought out plans for how we go back in time.”
As well as the fundraising drive through sale and leaseback transactions, Dame Sharon has set big cost-cutting targets to give the partnership ample room to invest. The partnership aims to cut business costs by £900 million by January 2026.
John Lewis's recent setbacks have cast doubt on the ability to pay staff bonuses this year as the company prioritizes investment.< /p>< p>This will be the third time in four years that staff have not received an annual bonus.
Dam Sharon survived a vote of confidence earlier this year, even as staff criticized her management of the company.
Earlier this year, the partnership hired its first executive director, Nisha Kankiwala, to help oversee the improvement process.