The future of John Lewis and Waitrose was thrown into chaos on Thursday, as the managing director of John Lewis was sacked and the chairman warned that staff may miss out on a bonus.
Paula Nickolds, who has been with the employee-owned retailer since 1994, leaves just three months after the managing director of Waitrose, Rob Collins, also stepped down following a major restructuring.
John Lewis Partnership chairman Sir Charlie Mayfield is also quitting – having announced his departure in November 2018 – and will be replaced next month by outgoing Ofcom chief Sharon White.
The chairman was asked several times whether he had fired Ms Nickolds, but declined to comment. He said: “I’m not going into the detail of a personal conversation.
“These changes (the restructuring announced in October)… are far bigger and greater than one individual whether that’s me, or Paula. It has many, many different levels.”
Ms Nickolds’ departure comes as the department store revealed a 2% like-for-like sales slump in the seven weeks to January 5. She declined to comment.
Charlie at John Lewis and Partners is a bit like Arsene Wenger at Arsenal - they both stuck around too long. But whilst in recent years John Lewis and Partners hasn't had a good cup run, Arsene still managed to win three FA cups in his final years.Greg Lawless, retail analyst at Shore Capital
The departing boss was supposed to become the new executive director of brand – overseeing both divisions of the partnership – in a newly-created role which she was due to take up in February.
Sir Charlie said: “After some reflection on the responsibilities of her proposed new role, we have decided together that the implementation of the future partnership structure in February is the right time for her to move on and she will leave the partnership with our gratitude and best wishes for the future.
“At the full year, we expect profits in Waitrose & Partners to be broadly in line with last year. In John Lewis & Partners we will reverse the losses incurred in the first half of the year, but profits will be substantially down on last year. We therefore expect that partnership profit before exceptionals will be significantly lower than last year.”
He added: “The partnership board will meet in February to decide whether it is prudent to pay a partnership bonus.
“The decision will be influenced by our level of profitability, planned investment and maintaining the strength of our balance sheet.”
In March last year, the company revealed that staff bonuses for the employee-owned retailer would be just 3% of annual pay – the lowest level since 1953 – after profits fell 45.4% to just £160 million.
Gross sales at the partnership in the seven weeks to January 4 were down 1.8% compared with last year at £2.2 billion. Waitrose saw a 1.3% fall in sales, due to store closures, but was up 0.4% on a like-for-like basis.
But at John Lewis there was a 2.3% fall in sales – or 2% on a like-for-like basis – with electricals and home furnishing sales both down heavily. They fell 4% and 3.4% respectively compared with a year ago.
Sir Charlie added: “We saw significant variation in levels of demand, with Black Friday sales up 10.0% on the equivalent period last year, followed by more subdued demand in the subsequent weeks.”
But most concerning for the employee-owned business is the collapse in profits at the partnership, with the chairman warning that “profits will be substantially down on last year”.
He added: “I can’t say I’m proud of our profit performance this year, but I’m hugely proud of the partners we’ve got in this business.”
When he became chairman in 2007, the following year’s bonus for staff was 20%. Last year it was just 3%. But Sir Charlie insisted the retailer has had to “sow the seeds… Back in 2015 we basically said no more physical growth because we could see the clouds coming… We then embarked on a major cost reduction drive and over the last three years.”
However, analysts questioned Sir Charlie’s own role in running the business.
Greg Lawless, retail analyst at Shore Capital, told the PA news agency: “Charlie at John Lewis and Partners is a bit like Arsene Wenger at Arsenal – they both stuck around too long.
“But whilst in recent years John Lewis and Partners hasn’t had a good cup run, Arsene still managed to win three FA Cups in his final years.”
There was some growth, with beauty sales up 4.7% and fashion up 0.1%, while at Waitrose online orders and basket sizes increased 23% in the seven days leading up to Christmas compared with last year.
However, John Lewis could only manage a 1.4% increase in online sales, meaning the group overall saw an online uptick of 16.7% in total.
John Lewis and Waitrose have had a difficult few years, with former bosses Andy Street and Mark Price leaving at similar times. Both have gone on to pursue careers in politics.
Ms Nickolds joined John Lewis in 1994 and worked her way up through the ranks to the position of managing director.
Just last October, in a major overhaul of the business structure, she was unveiled as the new head of brand for both businesses, with Waitrose boss Mr Collins also stepping down.
The £100 million cost-cutting exercise also saw 75 out of 225 head office roles axed, as the company attempted to recover from its first ever half-year loss in September.