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John Lewis faces backlash after it demands rebate from suppliers despite announcing record profits
The John Lewis Partnership is made up of 84,700 permanent staff, or Partners, who own 39 John Lewis shops and 290 Waitrose supermarkets. The Partners also run a John Lewis e-commerce and catalogue business, a production unit, and a farm. The Partners share in the company’s benefits and profits.
On March 7th, the company’s financial results for the year ended 26 January 2013 were released. The release pointed to a company that was outperforming with strong results, even in the current economic climate, when many other companies were struggling to stay on their feet. John Lewis’ department stores sales were up 13.5% year on year, while Waitrose sales were up 6.7%. John Lewis e-commerce sales were particularly strong, having grown by 40.8% compared to the previous year.
The financial release also detailed the company’s expansion: over the year, 19 new branches of Waitrose were opened, and online sales grew by 49%. Additionally, four new John Lewis shops were opened.
The Chairman of John Lewis Partnership, Charlie Mayfield, said “Although the market remains challenging, the Partnership has adapted quickly and successfully and we saw the benefits this year”.
The strong sales meant that John Lewis Partnership announced that all of its staff would receive a bonus worth 17% of the salary, the equivalent to nine weeks’ pay. The average bonus received would be £4,000.
However, the Partnership’s success was slightly tarnished when the company was accused of being greedy by the Forum of Private Business. The Guardian reported, on 12 March, that it had seen a letter from a head buyer for John Lewis which had been written to a supplier, stating that a rebate would be automatically applied to their costs. Suppliers pay a rebate to John Lewis if the supplier has seen year-on-year growth on their John Lewis products, which is dependable on size of growth. Sales growth of 50%, for example, incurs a 5.25% rebate.
A spokesman for the Forum of Private Business said, “They’d earn far more respect from the public if they rescinded this decision now, which would give heart to the many thousands of suppliers … that big business in the UK is prepared to listen and act when it gets something so badly wrong.”
A spokesman for John Lewis clarified that the rebates were, “part of our ongoing terms and conditions and as ever, our suppliers have the right to discuss these with us at any time.”
Find this interesting. You may also like John Lewis Partnership plc company profile & John Lewis Partnership Case Study: UK Retail Chain is Owned by its Employees.