UK's John Lewis issues partnership bonds

The UK's employee-owned John Lewis Partnership today announced it is raising £50m (€58m) through a retail bond issue aimed at customers.

John Lewis Partnership, which owns supermarket Waitrose and Britain’s biggest department store by sales, has raised finance through bond markets before, but the “partnership” bond is the first time that it has let its customers invest.

The bond will be available to 1.5 million cardholders and 70,000 staff, or “partners”.

The launch comes ahead of its 2010 results, which are expected to reveal the Partnership’s profits rose 15% to about £350m (€407m).

Charlie Mayfield, chairman of the John Lewis Partnership, said: “The Partnership Bond issue is in keeping with HM Treasury’s desire to develop non-bank lending channels to help improve macroeconomic resilience in the longer term.

“We want to explore alternative ways of raising funds as part of the Partnership’s borrowing programme, and to reach out to the retail investor.

“With interest rates and yields close to historical lows we believe our cardholders and partners will welcome a competitively priced, innovative product of this nature with the added comfort of the John Lewis Partnership brand and reputation.”

The five-year fixed rate bond will be offered to qualifying individuals to invest a lump sum of between £1,000 and £10,000, in multiples of £1,000.

It has a fixed annual return of 4.5% in cash with a further 2% paid in John Lewis Partnership gift vouchers.

Elsewhere, it was reported staff at John Lewis and Waitrose stores are likely to be awarded bonuses equivalent to between 16% and 18% of their annual salaries when the Partnership posts its annual results.

Last year, staff shared a bonus pot of £151.3m (€176m), with payments worth 15% of salary.

The group has outperformed rivals for the past few years as its more affluent consumers were able to cope better during the recession.

However, weekly sales figures since the end of January have suggested that customers are starting to spend more cautiously.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “It does appear that John Lewis sales have lost significant overall momentum in recent weeks, which is a worrying sign for consumer spending given that John Lewis has very much been an outperformer in the retail sector.”