M&S gaining on John Lewis in £20b fight for UK middle class

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For decades John Lewis Partnership Plc has been considered the pinnacle of British retailing, overshadowing archrival Marks & Spencer (M&S) Group Plc.
While the owner of the John Lewis department store and upmarket grocer Waitrose was lauded for its employee-ownership, service levels and quality, M&S struggled with never-ending turnaround plans, a revolving door of CEOs and plunging profits. But the tables have turned.
The partnership reported a £234 million ($283 million) loss, cancelled the employee bonus for the second time in three years, and warned of fresh job cuts for its 80,000 partners who co-own the business.
John Lewis has also appointed the first CEO in its 160-year history as it seeks to get a grip on a business which is losing market share in grocery and last month parted ways with the head of the department store arm.
In contrast, M&S recently reported its best ever market share in food over Christmas while its home and clothing division reached its highest share in seven years. Last year the retailer posted a pre-tax profit of £392 million after improving its fashion credentials and making its food more affordable.
“John Lewis, the favourite of the high street, seems to have lost its momentum whereas M&S seems to have turned a corner and is powering ahead with its transformation,” said Richard Lim, CEO at research consultancy Retail Economics.
Both department store chains, which date from the 19th century, generate more than £10 billion of sales each a year, and are battling for customers at a time when the cost-of-living crisis is squeezing household budgets. The problem for the partnership is that this fight is taking place during a turnaround programme led by a revamped top management team that has lost some retail experience along the way.
Chairman Sharon White, a former telecommunications regulator, took the helm in early 2020 and was immediately faced with a global pandemic and lockdowns that decimated brick-and-mortar sales. She quickly cut thousands of jobs, closed 16 John Lewis stores, with some never reopening from Covid lockdowns, and set a target of hitting £400 million profit by 2025.
White, who previously had never held a commercial executive position, said a key part of rebuilding profit would be investing in areas outside of retail, such as real estate and financial services. This push into new revenue streams has, however, coincided with one of the most challenging periods in retail with rampant inflation hitting consumer budgets.
While M&S profit is nowhere near the level it was before the turn of the millennium, the chain is making significantly more than the partnership.