England's department stores return – do they have a future?

The John Lewis Partnership Plc department store on Oxford Street in London

(Image credit: Chris J. Ratcliffe/Bloomberg via Getty Images)

published 24 March 2025

Under the hapless leadership of the former high-flying civil servant Sharon White, John Lewis looked to be in terminal decline. In the case of both the department stores and its upmarket grocery chain Waitrose, the retail chain had too many shops, selling the wrong products in the wrong places. At one point, it even looked as if it might have to abandon its treasured workers’ control model and bring in an outside shareholder with the capital necessary to keep it afloat.

Recently, it became clear that all it in fact needed was some tough management by an experienced retail boss. Under its new chairman Jason Tarry, a veteran Tesco executive, it announced a 73% rise in profits to £97 million for the last year and, although there is no sign yet of the staff bonus being restored, it was the best set of results in years. The retailer is selling its stuff under the “never knowingly undersold” slogan again and is using AI to track the prices charged by its main rivals. It has gone back to the basics of retailing and focused on the detail, and that is starting to generate better results.

It is not alone. Tesco was plunged into a crisis almost a decade ago, but it has since returned as the largest grocery retailer in the UK and its share price has almost doubled over the last ten years. Marks & Spencer (M&S) at one point seemed close to collapse, but has successfully turned itself around, and the share price has risen by 258% over the last five years. Next is also going from strength to strength, snapping up less successful brands, such as Fat Face and Reiss. Even Debenhams might make a surprise comeback – the fast-fashion retailer Boohoo is renaming itself after the department store it acquired in 2021 and turned into an online-only brand. The great traditional retail brands of Middle England are doing well again.

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Growth will prove elusive for retail companies

Don’t get too carried away though. Chains such as John Lewis, M&S and Tesco have all successfully turned themselves around. Under fresh management they have gone back to the basics of retailing, offering quality products that people want, at competitive prices. They have abandoned attempts at international expansion, brand extensions, or moving into financial services, IT, or any other industry that happens to be fashionable for a year or two, and concentrated on getting a few simple things right. But although this shows that they can be turned around, they can’t grow. They face three big problems.

First, employment taxes are about to rise sharply. From next month, the national insurance (NI) charged for each employee will rise and the threshold for paying it will come down to just £5,000. For retailers that typically employ lots of part-time, relatively low-paid workers, that will mean a big rise in tax bills that have to be paid irrespective of whether they are making any money or not. Analysts estimate that Tesco alone will have to pay an extra £250 million a year in NI, and that money won’t be available for investment in new stores, or new product lines, and will make it very hard to invest.

Second, the consumer is being squeezed. As figures published recently show, the economy is still getting smaller, with output contracting by another 0.1% in January and GDP per capita falling at an even faster rate. Finally, there may well be more tax rises on the way. With a stagnant economy, and with huge pressure on public finances, the chancellor may have little choice but to impose yet another round of tax rises, and businesses are the most likely target.

We have seen how tough the market is in the sharp falls in the share prices of Tesco and Sainsbury’s, with both down by 9% or more. There are fears of a price war with an embattled Asda, and, more broadly, worry that within a stagnant economy, the competition for customers will get more and more fierce.

Sure, investors who get in at the right time will do well. No one can buy shares in John Lewis (it is still owned by its employees), but anyone who bet on Tesco or M&S coming back when they were at rock bottom will have made plenty of money. JD Sports, with its shares down by a third over the last year, may present a similar opportunity right now, and so might the discount chain B&M. There will always be money to be made selling cushions, office clothes, and reasonably priced food to Middle England. Everyone needs that stuff, and John Lewis and M&S are the places to get it. But companies suffering rising costs while serving a market that no longer has much spare money to spend face long-term decline.

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Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.