John Lewis to launch smaller format

John Lewis, the employee-owned retailer, said it will launch a new smaller store format focussed exclusively on home furnishings and electrical and home technology products for the mid to premium market.

The firm said today the new format shop, which has not yet been named, will be a third of the size of a typical John Lewis department store, of which there are 27 in the UK.

John Lewis will invest an initial £6m in the new venture with the first 45,000 sq ft store opening in October in Poole.

This initial store, situated on an edge of town site owned by Land Securities, will create about 100 jobs.

John Lewis said it has already identified about 30 locations across the UK that could sustain the new format store, which will not carry a clothing offer.

"This is a significant departure for our business. Poole will be our first new format shop for 20 years," Managing Director Andy Street said at a media briefing yesterday.

The move was a response to a slowing in John Lewis' pipeline of new full-line department stores.

New department stores in Cardiff and at the Olympic site in Stratford, east London, were on track to open in September 2009 and in 2011 respectively. However, eight other projects have been delayed by developers.

Retail Director Gareth Thomas said the new format stores were "entirely complementary" to the plans for more full-line department stores, which the group remained fully committed to.

"We know our competitors have a much higher level of coverage in the UK than we do and our research has shown that there are growth opportunities for our business in smaller format shops," he said.

Many British retailers have struggled over the past year as consumers cut back on spending amid soaring unemployment, falling house prices and fears of a long and deep recession.

Sellers of big ticket discretionary products linked to the housing market have been particularly badly hit. In March, John Lewis reported a 26 per cent slump in 2008 profit and said 2009 would be another difficult year. "The timing (of the new store plans) is certainly counter intuitive. Here we are at the bottom of a trough in the economy," Thomas said.

He stressed John Lewis was planning for the long term and was confident Britain would be well out of recession by the time the new format was fully rolled-out.

Jeremy Collins, head of John Lewis' retail development, said internal estimates for return on capital employed in the new format stores "bear up well" against the department stores.

He declined to reveal details of the retailer's rental deal with Land Securities.