John Lewis Partnership

John Lewis Partnership

Type	Private (All shares held in trust)
Industry	Retail
Founded	Oxford Street, London (1929)
Founder(s)	John Spedan Lewis
Headquarters	London, England, UK
Key people	Charlie Mayfield (executive Chairman) Andy Street (Managing Director, John Lewis) Mark Price (Managing Director, Waitrose)
Products	Clothing, cosmetics, housewares, food, direct services
Revenue	£9.5 billion (2013)
Net income	£409.6 million (2012–13)
Employees	84,700 (2013)
Divisions	Waitrose John Lewis
Website	John Lewis Partnership

The John Lewis Partnership is an employee-owned UK partnership which operates John Lewis department stores, Waitrose supermarkets and some other services. The company is owned by a trust on behalf of all its employees — known as Partners – who have a say in the running of the business and receive a share of annual profits, which is usually a significant addition to their salary. The group is the third largest UK private company in the Sunday Times Top Track 100 for 2010. Additionally, John Lewis also has the distinction of being UK's best high-street website after beating M&S in October 2010. The chain's image is upmarket, and it appeals strongly to middle- and upper-class shoppers. Recently, however, John Lewis has broadened its marketing strategy towards all types of buyers, with the introduction of the 'Value' range to John Lewis and the 'Essential' range to Waitrose, and the expansion of the business.

The Partnership also supplies the Ocado web supermarket with Waitrose own-brand foods and John Lewis own-brand non-food items.

History

John Lewis opened a drapery shop in 1864 at 132 Oxford Street, in London. He had been born in Shepton Mallet in Somerset in 1836, and been apprenticed at 14 to a linen draper in Wells. He came to London in 1856 and worked as a salesman for Peter Robinson, an Oxford Street draper, rising to be his silk buyer. In 1864 he turned down Robinson’s offer of a partnership and rented his own premises on the north side of Oxford Street, on part of the site now occupied by the department store which bears his name. There he sold silk and woollen cloth and haberdashery. His retailing philosophy was to buy good quality merchandise and sell it at a modest “mark up”. Although he carried a wide range of merchandise he didn’t bother much about displaying it and never advertised. His skill lay in sourcing the goods he sold, and most mornings he would go to the City, accompanied by a man with a hand barrow. Later he would make trips to Paris to buy silks.

Lewis spurned holidays and games and devoted himself entirely to the business, which was very successful. He invested the money he made from it in residential and small retail properties, many of which he never visited. He expanded the Oxford Street business by renting neighbouring properties on Oxford Street and then along Holles Street, and gradually moved into other classes of merchandise: first the new area of ready-made women’s apparel, and later children’s wear and furniture. He never held “sales”, saying that he was intent on building a sound, permanent business.

In 1884 and aged 48 Lewis married Eliza Baker, a schoolmistress with a university education, who was 18 years his junior. They set up home in a mansion on the edge of Hampstead Heath, for which Lewis made up the name Spedan Tower. He must have liked the name because when Eliza bore a son in 1885 he was called John Spedan Lewis. A second son, Oswald Lewis, was born in 1887. After Westminster School, both sons joined Lewis in the business, and he gave each of them a quarter share of it on their twenty-first birthdays.

There was constant quarrelling between Lewis and his sons. By 1909 Oswald wanted out and Lewis senior reluctantly agreed to buy back Oswald’s quarter share of the business for £50,000 (equivalent to about £4.5 million in 2010). Oswald went to read Law at Oxford, qualified as a barrister, and became a cavalry officer in 1914, but was injured and discharged in 1916, whereupon he accepted an invitation from his father to rejoin the business.

Lewis had several run-ins with Lord Howard de Walden, his Oxford Street landlord, and in 1903 he spent three weeks in Brixton Prison for defying a court order obtained by de Walden. In 1911 de Walden sued him for libel; Lewis was found guilty, but the jury awarded damages of just a farthing.

In 1906, Lewis bought a controlling interest in the Sloane-Square-based business Peter Jones Limited, the eponymous founder of which had died the previous year. Lewis walked from Oxford Street with the £20,000 purchase price in bank notes.

In the next 13 years the Peter Jones business was not profitable – no dividends were paid to Lewis and the external shareholders  – and in desperation in 1914 Lewis appointed his son Spedan as chairman of Peter Jones. This gave Spedan Lewis complete control and he decided that the underlying problem was that the staff had no incentive to do a good day’s work because their own interests were not in line with those of the business. He shortened their working day and instituted a system of commission for each department, paying selling staff amounts based on turnover. He held regular meetings at which staff could air any grievances directly with him. In 1916, after a disagreement with his father, Spedan Lewis exchanged his 25 per cent interest in the Oxford Street business for Lewis’s shares in Peter Jones Limited. He made improvements in staff conditions, including granting a third week’s paid holiday each year. He had hot and cold running water installed in the staff bedrooms over the shop. In 1918 he started publishing a fortnightly newspaper telling staff how the business was faring. In 1919 he instituted a staff council, the first decision of which was that staff should be paid weekly instead of four-weekly. Business prospered: there was a profit of £20,000 in 1920. Spedan Lewis’s radical idea was that the profits generated by business should not be paid solely to shareholders as a reward for their capital. Shareholders should receive a reasonable but limited return, and labour should be the recipient of the excess. His concept of “fairer shares” involved sharing gain, knowledge and power. In 1920 Spedan started distributing Peter Jones preference shares to staff, who were now called “Partners”.

In contrast, John Lewis made no improvements to the conditions of his staff, and grievances built up to such an extent that in 1920 there was a five-week strike at Oxford Street. Despite support for the strikers from – among others Queen Mary, Lewis sacked them and engaged new staff.

The early 1920s were not successful for Peter Jones. Dividends on preference shares, many of which were held by Partners, were not paid. In 1924 there was a reconciliation between John Lewis and Spedan Lewis. Trade at Oxford Street had fared better, and John Lewis made a cash injection into the Sloane Square business.

In 1925 Spedan Lewis devised the slogan “never knowingly undersold” at Peter Jones. Intended mainly as a control on sourcing merchandise, it also meant that customers could shop knowing that they were not paying more at Peter Jones than they could buy identical goods for at other stores. Trade improved and profit sharing was resumed.

By 1926 Lewis senior was 90, Spedan was impatient to gain control of John Lewis, Oxford Street, so that he could implement his radical ideas there, and Oswald again wanted out. Without telling their father, Spedan took out a bank loan and bought out Oswald’s inheritance. After going round the world, Oswald embarked on a political career, becoming Conservative Party MP for Colchester in 1929, and holding the seat until 1945. John Lewis died aged 92 in 1928, and Spedan Lewis became sole owner of the Oxford Street business, in addition to Peter Jones. That same year, he bought the premises of T J Harries on the eastern side of Holles Street in Oxford Street, into which he exapanded John Lewis.

In 1929 Spedan Lewis signed a deed of settlement which transferred shares in John Lewis Limited and Peter Jones Limited to trustees (himself, his wife and his brother-in-law). The profits of the combined business would be distributed to its employees, either as cash or as fixed-interest stock in the new company: the John Lewis Partnership Limited. In return, Spedan Lewis took £1 million of non-interest-paying loan stock, which would be repaid to him over thirty years. He would retain personal control of the business, but would not receive any interest, fees or salary, living on the repayment of the loan stock. These annual capital repayments were initially equivalent to about £1.5 million in 2010 money, but inflation reduced their value by the 1950s to the equivalent of about £0.5 million in 2010 money.

In 1933 the John Lewis Partnership started acquiring other retail businesses, buying Jessops of Nottingham, and Lance and Lance of Weston-super-Mare. In 1934 it acquired Knight and Lee in Southsea, and Tyrell and Green in Southampton. It also started rebuilding Peter Jones to a modern design. In 1937 it bought Waitrose Limited, which operated ten counter-service grocery stores in West London.

The biggest acquisition came in 1940, when the John Lewis Partnership paid £30,000 for Selfridge Provincial Stores Limited, which owned 15 shops: Blinkhorns in Gloucester, Buckleys in Harrogate, A H Bull in Reading, Bon Marché in Brixton, Caleys in Windsor, Cole Brothers in Sheffield, George Henry Lee in Liverpool, Holdrons in Peckham, John Barnes in Hampstead, Jones Brothers in Holloway, Pratts in Streatham, Quin & Axton in Brixton, Robert Sayle in Cambridge, Thomsons in Peterborough, and Trewins in Watford. The business now comprised 21 department stores and 10 grocery shops.

The War took its toll, and several stores were damaged by bombing, notably the “west house” of John Lewis, Oxford Street (on the west side of Holles Street), which was lost completely in September 1940. Some small businesses were acquired, including a leather good shop, and three silk shops. In 1948 three drapery stores were created in South Africa, but were closed in 1954.

In 1950 Spedan Lewis executed a second deed of settlement, which passed ownership of the John Lewis Partnership to trustees to hold for the benefit of those who worked in the business. He continued to manage it as if he were still the owner, saying in 1957 that it was necessary to concentrate management in one pair of hands.

Spedan Lewis also retained for himself the right to choose his successor when he retired his 70th birthday in 1955. He had originally intended that Michael Watkins, his right-hand man for many years, would succeed him as chairman, but Watkins died in 1950. Spedan asked his son, Edward Lewis, if he would fill the role but he declined. Spedan appointed a loyal, long-serving lieutenant, Bernard Miller, but expressed the hope that in due course Edward would succeed Miller as chairman. In the event, Miller was succeeded by Peter Lewis, the son of Oswald Lewis.

In 1953 the John Lewis Partnership sold several small stores but acquired two large ones: Heelas in Reading and Bainbridge in Newcastle.The rebuilt store on Oxford Street was reopened in 1960, and the sculpture Winged Figure by Barbara Hepworth was added in 1962.

The principle and slogan never knowingly undersold adopted in 1925 is still honoured and has been widely copied. The principle has been refined, most notably to exclude retailers who trade only online. The pledge has recently been revised to include extended insurance and delivery charges when comparing prices. John Lewis monitors local competitors and reduces the shelf edge price if it is being "undersold".

To accommodate national advertising, in 2002 the company began the process of renaming stores not branded as John Lewis (Tyrrell & Green, Heelas, etc.) with the nationally recognisable name. Peter Jones in London will remain the only exception to this policy when the premises of Knight & Lee are replaced by a new department store in Portsmouth.

Organisation of the Partnership

Every employee is a Partner in the John Lewis Partnership, and has an opportunity to influence the business through branch forums, which discuss local issues at every store, and the divisional John Lewis and Waitrose Councils. Above all these is the Partnership Council, to which the Partners elect at least 80 per cent of the 82 representatives, while the chairman appoints the remaining. The councils have the power to discuss ‘any matter whatsoever’, and are responsible for the non-commercial aspects of the business: the development of the social activities within the Partnership and its charitable actions.

The Partnership Council also elects five directors on the Partnership Board (which is responsible for the commercial activities), while the chairman appoints another five. The two remaining board members are the chairman and the deputy chairman.

Every non-management Partner also has an open channel for expressing his/her views to management and the Chairman.

The John Lewis Partnership publishes a weekly in-house magazine, called The Gazette. It is the oldest in-house magazine currently still being published in the UK. Each John Lewis branch also has its own weekly magazine, called The Chronicle. Partners can write anonymous letters to the Gazette and the Chronicles, holding management to account.

The John Lewis Partnership has a very extensive programme of social activities for its Partners, including two large country estates with parkland, playing fields and tennis courts; a golf club; a sailing club with five cruising yachts, and three country hotels offering holiday accommodation for the Partners. Partners are also enrolled in a very favourable pension scheme, are covered by death-in-service insurance, and are given very generous holidays. In addition to this, upon completing 25 years of service for the company, Partners are given a paid six-month break, known as "Long Leave".

Finally, every Partner receives an annual bonus, which is a share of the profit. It is calculated as a percentage of salary, with the same percentage for everyone, from top management down to the shop floor and storage rooms. The bonus is dependent on the profitability of the Partnership each year, varying between 9% and 20% of the Partners' annual salaries since 2000.

In 1999, in response to a fall in profits, there were calls from some Partners for the business to be demutualised and floated on the stockmarket. If this had gone through, each Partner would have received a windfall averaging £100,000 each. In the end, no one on the Partnership Council agreed with the idea and only one member spoke in favour of a referendum on the issue.

Financial performance

Financial year	Turnover	Profit before tax	Net profit	Partner bonuses	Profit retained
2012–2013	£9.54 billion	£509.0 million	£409.6 million	£210.8 million (17%)	£198.8 million
2011–2012	£8.73 billion	£393.3 million	£353.8 million	£165.2 million (14%)	£188.6 million
2010–2011	£8.2 billion	£431 million	£367.7 million	£194.5 million (18%)	£173.4 million
2009–2010	£7.4 billion	£389 million	£306.6 million	£151.3 million (15%)	£155.3 million
2008–2009	£7 billion	£279.6 million	£580 million	£125.5 million (13%)	£146.0 million
2007–2008	£6.8 billion	£379.8 million	£320.4 million	£181.1 million (20%)	£198.7 million
2006–2007	£6.4 billion	£319.2 million	£263.2 million	£155 million (18%)	£164 million
2005–2006	£5.7 billion	£251.8 million	£215.1 million	£120.3 million (15%)	£94.8 million
2004–2005	£5.3 billion	£215.3 million	£175.9 million	£105.8 million (14%)	£70.1 million
2003–2004	£5.0 billion	£173.5 million	£148.8 million	£87.3 million (12%)	£61.5 million
2002–2003	£4.7 billion	£145.5 million	£108.6 million	£67.6 million (10%)	£41.0 million
2001–2002	£4.4 billion	£141.5 million	£103.3 million	£57.3 million (9%)	£46.0 million
2000–2001	£4.1 billion	£149.5 million	£120.4 million	£58.1 million (10%)	£62.3 million
1999–2000	£3.7 billion	£194.7 million	£161.0 million	£77.8 million (15%)	£83.2 million

The John Lewis Partnership's financial year runs from February to January the next year. The percentage figure in the bonus column shows the bonus's value in relation to a Partner's salary. 8.33% would mean one additional month's salary and 16.66% would mean two months' salary, showing that the staff has received more than one month's additional salary as bonus each year since 2000. This is an attractive facet of the company, which has a reputation for looking after its staff (including paid secondments whilst Partners conduct charity work; subsidised Dining Rooms and staff excursions, amongst other benefits).

Department stores

As of 2012 the John Lewis division operates 30 full-line department stores, nine John Lewis at Home Stores and a webstore. The stores are in a mixture of city centre and regional shopping centre locations. They are generally the largest or second largest department store in their local market. The flagship Oxford Street store in London remains the largest John Lewis outlet in the UK.

Newer John Lewis at home stores are opening to cater for areas which have no large John Lewis department store near them. They are around a third of a size of a normal department store. The first store opened in Poole in October 2009. Croydon followed in August 2010 with Tunbridge Wells and Swindon opening later that year. In Autumn 2011, Tamworth and Chester were opened, followed by Chichester, Newbury and Ipswich in 2012. This type of store contains both Home and Electrical departments with services such as a cafe and 'Click and Collect' also available. A new 'flexible format' store was trialled in Exeter 2012, with full line of stock in a smaller physical store, relying heavily on 'click and collect'/next day delivery both in store and out.

Peter Jones is one of the largest and best-known department stores in central London. It is a store of the John Lewis Partnership and located on Sloane Square, at the junction of King's Road and Sloane Street, in the fashionable Chelsea district, close to the elite districts of Belgravia and Knightsbridge. Peter Jones was founded as an independent store but was bought by John Lewis, owner of the eponymous store in Oxford Street, in 1905. In 1929 Lewis's son, John Spedan Lewis, who then owned both businesses, combined them into a single business.

Supermarkets

The John Lewis Partnership also owns Waitrose, an upmarket supermarket chain which has 259 branches (2011) and 35,573 (summer 2006) Partners. Waitrose trades mainly in London and the South of England, and was originally formed by Wallace Waite, Arthur Rose and David Taylor. The company was taken over by the John Lewis Partnership in 1937. The acquisition of 19 Safeway branches in 2004 greatly increased the size of the company and saw branches open in the north of England for the first time. A further six stores were purchased from Morrisons in Autumn 2005 and again helped the march into previously unexplored territories. Then, in March 2006, Waitrose announced the purchase of five stores from Somerfield, with the first two stores in Scotland, both of which are in the capital, Edinburgh. In July 2006, Waitrose announced the purchase of six more stores and a distribution centre from Morrisons. In 2007 the first purpose-built Waitrose supermarket in the north of England opened at Cheadle Hulme, Greater Manchester. In January 2009, Waitrose announced the purchase of an additional 13 stores from Somerfield which included a store in Glasgow marking its third opening in Scotland. The chain opened its first new-build Scottish store and fourth Scottish location overall in Glasgow's Newton Mearns in the autumn of 2011. Waitrose also sells online and was the first to offer a free delivery service.

Waitrose brand merchandise is also sold by Ocado, an independent online supermarket. The John Lewis Partnership helped finance Ocado's creation, and later transferred its interest to its pension fund, which owned 29% of Ocado, The pension fund fully divested itself of its share ownership in February 2011.

Direct services

On 3 October 2006, the Partnership launched a direct services' company named Greenbee. Greenbee provided travel, leisure and financial services. Initially, the company offered home, travel, wedding and events insurance as well as a travel and tickets service. It subsequently expanded to offer other services including car and pet insurance, insurance for second homes and broadband Internet access. In late 2010 Greenbee was absorbed into the John Lewis brand and insurance services are now offered under the John Lewis Insurance brand. Broadband and telephone services will continue to be provided by John Lewis.

Credit cards and account (store) cards

Unusually, John Lewis department stores did not accept Visa and MasterCard credit cards until 1999, previously only accepting the John Lewis Account Card (a form of charge card) and the Switch (now Maestro) and Delta (now Visa Debit) debit cards.

On 28 March 2004, the John Lewis Partnership announced the launch of their own credit card — the Partnership card. This was launched with HFC which is a division of the banking giant HSBC. It was launched as a MasterCard with a choice of four designs (effectively four different colours).

The credit card follows on from, and supersedes, the John Lewis (and Waitrose) account cards which have been around for 40 years. These cards are no longer available, and holders of these are being encouraged to replace them with the Partnership card. They can, however, still be used, and some cards from the mid-1970s are still in use.

The Partnership card is designed as a cashback credit card, with 6 months interest free credit and a 16.9% APR. It offers a 1% rebate for purchases at stores (including online stores) that are members of the John Lewis Partnership (such as John Lewis and Waitrose). For purchases at other stores it offers a rate of 0.5%. The rebate is awarded as vouchers which can be spent in a store of the John Lewis Partnership. Vouchers are earned by accumulating points, with 1 point awarded for every £1 spent in John Lewis Partnership stores, and every £2 spent elsewhere. 500 points earns a £5 voucher. Earned vouchers are sent to card holders by post and can be spent in a store of the John Lewis Partnership.

Manufacturing

The John Lewis Partnership currently operates one manufacturing business, Herbert Parkinson, in Darwen, Lancashire. This company, established as a weaver of jacquard fabrics in 1934, was acquired by the Partnership in 1953. Herbert Parkinson currently produce John Lewis own-brand fabrics and curtains as well as filled furnishing products such as cushions and pillows. The company operates a wholesale business to outside customers in addition to supplying John Lewis branches.

Until September 2007, the Partnership also owned two further textile production businesses: Carlisle-based printer Stead McAlpin (founded c. 1875, 200 workers) and Haslingden, Lancashire-based weaver J. H. Birtwistle. In spite of capital investment and improvements in efficiency, neither had been profitable for almost 10 years. Apex Textiles, whose managing director is Jim Kidd, was formed to buy the businesses. The Partnership announced its intention to retain both businesses as key suppliers once they were under new ownership and to agree ex gratia payments to Partners employed at the affected sites.