John Lewis seeks rent cuts from landlords

Edmund Heaphy
Finance and news reporter
A John Lewis store on Oxford street in London. Photo: Isabel Infantes/EMPICS Entertainment

John Lewis has asked some of its landlords for discounts, in yet another sign that the crisis crippling high streets and shopping centres is affecting even the best-positioned retailers.

John Lewis has notified some landlords that it will cut the service charge it pays them by 20%.

In a statement, the retailer said that it had faced “regular increases” to the service charges paid to landlords for some of its stores in shopping centres, of which it has 20.

Service charges, which tend to be a source of friction between retailers and landlords, ostensibly exist to allow landlords to recover the costs of operating properties from occupiers.

“Over the last three years we have seen an increase in service charges of 20% and these continued increases are simply not acceptable particularly in the absence of strenuous efforts by landlords to work collaboratively with us to reduce these costs,” John Lewis said.

The BBC first reported that John Lewis was seeking reductions from landlords.

“We are investing more in our current shop estate than ever before to do everything we can to encourage customers and grow footfall to our shops and we hope that our landlords will support us in continuing to do this.”

The decision to cut the service charges it pays was done without any consultation with landlords, the BBC reported.

John Lewis earlier this week announced a major cost-cutting plan. On Tuesday, the retailer said that it would shed about a third of management roles in an attempt to reduce its costs by £100m.

As part of the move, the company’s John Lewis and Waitrose divisions, which are currently operated separately, will be brought together under one management.

That came after John Lewis in September announced a pre-tax loss of £25.9m for the six months to the end of July, compared with profits of £800,000 in the same period a year ago.

The company issued a stark no-deal Brexit warning, saying that such a scenario would have a “significant” impact.

It would not be possible to mitigate that impact, said Charlie Mayfield, the outgoing chairman of John Lewis.