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John Lewis poised to water down partnership model

John Lewis has been run as a partnership since 1950 - Daniel Leal/AFP/AFP
John Lewis has been run as a partnership since 1950 - Daniel Leal/AFP/AFP

John Lewis is preparing to water down its decades-old staff ownership model by selling a stake to an outside investor.

The retailer, which has been run as a partnership since 1950, is reportedly exploring a sale as part of efforts by chairman Dame Sharon White to raise between £1bn and £2bn of new investment.

Any sale could require a change to John Lewis's constitution, meaning it would need approval by two thirds of the business's partnership council of 60 staff. Money raised is expected to be reinvested into the  company instead of being given to workers.

A deal would amount to a seismic change to John Lewis's model, in which staff are given a share of profits in an annual bonus.

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The company's success has previously been praised by politicians including Sir Nick Clegg, who said in 2012 that the country should attempt to build a "John Lewis economy" of stakeholder capitalism.

But it has struggled in recent years as the rise of the internet hurt clothing and homeware sales. The retailer's supermarket arm, Waitrose, has struggled in the face of an assault on the middle classes by the German discounters and renewed success by Marks & Spencer.

John Lewis announced a £230m loss last week and scrapped its staff bonus, while cutting around 4,000 jobs and attempting to overhaul its technology, stores and supply chain.

The partnership model means John Lewis is unable to raise equity and has instead been forced to sell bonds. It already has £1.7bn of debt on its books.

Its finance director, Bérangère Michel, is said to have raised the topic of selling a stake at a meeting late last year and plans have since been developed by Dame Sharon according to the Sunday Times, which first reported the proposals.

Last week she appointed the former Hovis and Burger King executive Nish Kankiwala as the partnership's first chief executive.

The company has previously struck a £500m deal with money manager Abrdn to build rental properties, and was an early investor in the online supermarket Ocado.

John Lewis said: “We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans. We’ve done this with Ocado in the past and now with Abrdn. Our partners, who own the business, will be the first to hear about any developments.”