More signs of financial pressure at the John Lewis Partnership have emerged with the BBC reporting the retailer is carping about service charges its landlords charge.
The Beeb has been informed that the retailer is planning to withhold 20% of the current quarter’s service charges in some location as it believes the charges, which are for things such as heating and security, have got out of whack.
"At a time when we are doing everything we can to reduce our cost base, we have unfortunately been faced with regular increases to the service charges we pay for some of our shops in shopping centres,” a spokesperson for John Lewis said.
"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,” the spokesperson added.
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It is not uncommon for hard-pressed retailers to try to renegotiate rental agreements but withholding service charge fees is a relatively new development.
Not surprisingly, property companies are reluctant to budge an inch on contracted fees as it could open the floodgates to a host of renegotiation pledges by other retailers, and the BBC understands that landlords will be taking legal advice on the retailer’s threatened action.
We think this is admirable from the company classed as "gold standard". There is no jumping straight into a CVA when retail gets tough, forcing landlords into a corner. Well done John Lewis & Partners we hope they work with you https://t.co/n1IF3LCLUb#johnlewis #goldstandard
— Lucas Johnson Ltd (@LJinsolvency) October 4, 2019
"Every landlord will be looking at their lease, talking to lawyers who will get revved up to recover this money as a debt," one landlord told the BBC.
Listed property companies Hammerson PLC (LON:HMSO) and Intu Properties PLC (LON:INTU) are among the companies leasing property to John Lewis. Intu, which has seen its share price plummet over the last three years from 290p to around 40p, is likely to be especially opposed to cutting its leaseholders some slack.