John Lewis plans to sell off a dozen Waitrose stores to raise up to £150m as the troubled department store seeks fresh funding for its turnaround.
The partnership will next week start marketing 12 supermarkets for a sale and leaseback scheme in an effort to raise new funds.
The Waitrose sites are understood to be mostly located in the south of England, where property values are highest, and will hold 20-year inflation-linked leases, meaning the supermarkets will continue to operate at the sites.
Sources said the sale provided an opportunity for the retail giant to test the market as it looks to extract more cash from its valuable property holdings.
It comes as the John Lewis Partnership, which owns both the department store and supermarket chain, battles to turn the business around after a recent run of losses.
The group lost another £59m in the first half of this year and chairman Dame Sharon White was forced to delay her turnaround plan by two years, saying John Lewis no longer expected to return to “sustainable profit” by 2026.
Dame Sharon had vowed the company would make an annual profit of £400m by that date, but has now admitted the goal will not be reached until 2028.
She has blamed the poor performance on surging inflation, as well as the need to invest more in the business to turn around performance. The retailer has also been hit by an increase in shoplifting, losing an extra £12m this year to theft.
As an employee-owned partnership, John Lewis’s options for raising money are more limited than rivals and the partnership already has net debts of £1.7bn.
Dame Sharon considered allowing private investors to buy a share of the partnership earlier this year as part of efforts to raise money but has since ruled out that options after backlash.
Property is the largest single asset on the partnership’s £6.7bn balance sheet. Its stores were worth £2.9bn at the end of last year. The partnership owns 35 department stores and 329 Waitrose shops.
Sale and leaseback deals allow the group to maintain its stores but cash in on the value of the property.
These agreements are not uncommon in the industry. Both Asda and Morrisons have completed sale and leasebacks since their takeovers by private equity.
However, the transactions weaken a company’s balance sheet and have been criticised by unions. GMB has previously branded Asda’s sale and leaseback deals “nothing more than asset stripping”.
Commercial real estate firm CBRE is acting as agent on the Waitrose sale and leaseback deal, which was first reported by Bloomberg. John Lewis declined to comment.
Waitrose has become the focus of John Lewis’s turnaround efforts this year, with senior managers admitting the middle class supermarket is run far less efficiently than rivals. Staff have been told they need to be more flexible in their shift patterns and warned they face possible job cuts if they do not.
James Bailey, executive director of Waitrose, told the Telegraph last week that the partnership planned to invest in his division to improve performance.
He said: “The partnership is in a position where it’s able to reinvest in that shopping estate from now on, and we’ve got really big, well-thought-through plans about how we go back through the years.”
As well as seeking to raise funds through sale and leaseback deals, Dame Sharon has put in place large cost cutting targets to give the partnership enough room to invest. The partnership aims to strip £900m of costs out of the business by January 2026.
John Lewis’s recent run of poor performance has cast doubt over whether staff will be paid bonuses this year as the company prioritises investment.
It would be the third time in four years that staff miss out on the annual bonus.
Dame Sharon survived a confidence vote earlier this year even as employees criticised her management of the company.
Earlier this year the partnership hired its first ever chief executive, Nish Kankiwala, to help oversee the turnaround.