John Lewis may be out of the woods – but it’s no M&S

The partnership has resurfaced into a fast-changing and increasingly competitive retail landscape

As Dame Sharon White nears the end of her long goodbye at John Lewis, it is only natural to ask whether her punishing five-year turnaround plan has been successful.
Unsurprisingly, the official line from company headquarters is that it has. “John Lewis Partnership transformation on track” is the succinct opener to its half-yearly financial results.
It’s a pretty bold statement for an organisation still very much in the red at this point of the year. Nevertheless, one can understand the desire to focus on the positive after the upheaval of Dame Sharon’s tenure.
Staff morale has been badly affected by heavy cost-cutting that has resulted in bonuses being axed for three out of the last four years.
The naysayers may wonder whether it is a sign of how low the bar is set that a narrowing of losses from £59m to £30m is regarded as proof that the “transformation plan is working”.
On the other hand, this is an organisation that managed to chalk up £5.2bn of turnover in just six months to the end of July, and as partnership chief executive Nish Kankiwala points out, annual profits are on course “to grow significantly” from the £42m last reported.
His assertion that such a result would represent a “marked improvement” from two years ago when it racked up £234m of losses, is pretty accurate.
With Dame Sharon’s successor, Jason Tarry, due to start next week, she departs having rescued John Lewis from a brush with death, but with a true return to form still feeling some way off and many unanswered questions hanging over one of retail’s great names.
A series of sharp about-turns has left the strategy feeling both underwhelming and not entirely coherent.
The decision to scrap Dame Sharon’s target for 40pc of profits to come from non-retail ventures by the end of the decade was probably the right one. Ditto the return of the “never knowingly undersold” price pledge that was the bedrock of John Lewis’s offering for decades before Dame Sharon axed it.
The problem is not that the partnership plans to “unashamedly focus on investing back into our retail businesses” – if more time had been spent trying to recapture some of the magic that once made John Lewis the gold standard in customer service, rather than being distracted by talk of garden centres and second-hand goods, its recovery might not have been so drawn out and painful.
The issue is the means by which the management intends to do it.
With losses totalling nearly £800m over the last three years, and a cash injection from external investors emphatically ruled out, the capital to revamp stores has had to come from a whopping £900m of cost-cuts, part-financed by job losses and a prolonged bonus freeze.
Needs must, but service can only be improved if staff morale is high, and the discontent has at times seemed at risk of spilling over into outright rebellion.
Kankiwala’s refusal to commit to reviving partner payouts this year suggests John Lewis shoppers shouldn’t expect to be greeted by cartwheeling shop-floor assistants just yet.
Tarry’s job will be made harder still by the impressive form of several of its biggest rivals, chiefly Marks & Spencer.
John Lewis acolytes may point out that the great M&S comeback required 20 years of toil, but uncomfortable comparisons are hard to avoid when the competition is firing on all cylinders.
Along with technology and homeware, John Lewis department stores used to be renowned for its upmarket fashion; but while management complains that the weather has dampened clothing sales, M&S fashion is undergoing a remarkable renaissance.
The women in my family are talking excitedly about M&S clothes again – or in the case of my wife, for the first time ever. I can vouch for the menswear too – and not just the third-party brands that can now be found at M&S. For the first time in years, some of its own-label attire has a decidedly dapper edge to it.
Meanwhile, Next has said it is poised for a “new era of growth” as it nears the milestone of £1bn of annual profits.
The John Lewis Partnership can at least point to growth at Waitrose. Not for the first time, output at Waitrose is helping to cover up the flaws within the struggling department stores, with a 5pc sales lift versus a 3pc slide at its sister stores.
Even so, the competition in the grocery market is arguably more fierce than anywhere, particularly in the battle to feed Middle England.
Food sales at M&S are expanding at double-digits, Ocado has been taking market share for seven months straight, and now Aldi and Lidl are gearing up to aggressively target more affluent customers.
Nevertheless, with the partnership continuing to be a place of contrasting fortunes, the most difficult question Tarry may be required to confront is whether supermarkets and department stores belong together in today’s world.
The latter is increasingly an outdated concept, and the longer they struggle the more they divert investment away from the former, restricting Waitrose’s ability to defend its position from rivals.
Dame Sharon toyed with the idea of messing with the set-up and instantly regretted it.
Yet while the former civil servant was used to doing things by consensus, Tarry has spent more than 30 years at Tesco, an organisation that has never been afraid to ruffle feathers in its single-minded pursuit of profit.
Maybe he will be forced to think the unthinkable.