Profile: Sharon Flood, FD of John Lewis

Sharon Flood, John Lewis FD

The business of high street shopping is fiercely competitive and fraught with
reputational risk. For John
Lewis, keeping up with the Joneses ­ in this case, Peter Jones et al ­ is
the responsibility of Sharon Flood. She is the person charged with keeping the
numerous metaphorical plates of John Lewis all spinning without the whole show
coming crashing down. In the land of upside-down Christmas trees, own-label
brandware and high-profile shop openings, the retail FD is king.

Sharon Flood has been at the financial helm of
John Lewis for two and a
half years, so plate spinning is something at which she has become adept. She
has two children, is a trustee of a charity, enjoys skiing and windsurfing,
‘anything that gets you out and about’, in addition to discharging her duties at
John Lewis.

Tradition is a watchword at the company, but CIMA-qualified Flood, who cut
her accountancy teeth at Unilever before moving into finance director roles at
BG Electrical and Woolworths, had to pull the finance function into the 21st
century soon after stepping through John Lewis’ doors.

Its stock, sales and margins system has been in place for nearly half a
century.
‘We faced a big systems’ agenda,’ says Flood. ‘One of our key systems is 40
years old but we’re very far advanced in efforts to replace it. We’re looking to
have it in place next year and we’re also looking to implement a new ledger
system as well. My time here has involved a huge amount of work in terms of
structure and people, but also the systems and processes that underpin it.’

You get the distinct impression on meeting Flood (she answers questions a
fraction of a second after they have been asked) that being proactive is an
attribute close to her heart. John Lewis is about to enter a third Christmas of
outperforming the market, but it has taken major effort to get the finance
function up to Flood’s specifications.

Each of the 26 current John Lewis stores has a dedicated finance team at each
outlet which is unusual these days, according to Flood. On arrival, she found a
small divisional team at the centre of the finance function giving a high level
of support to the heads of branches, but very little support to the board making
the decisions about the future of business.

‘I looked at the structure and introduced three key analytical teams
concentrating on long-term strategy, the buying/marketing side and the store
side so that their customers knew who their finance partners were and had
somebody to improve the quality of their decision-making and help run their
basic processes.’

The CIMA fellow then went about consolidating the processing operations of
the divisions into one central hub in Stevenage, which allowed the division to
operate under a single agenda ‘rather than having activities here, there and
everywhere’.
Strengthening the financial control environment to ensure a more effective
balance sheet and cashflow together with tightening up the budgeting,
forecasting and reporting all had to be done quickly, Flood recalls.

Focusing on reporting, not being a quoted business means that John Lewis
doesn’t have the same obsession with how the numbers look. That’s not to say
that the implementation of IFRS has been plain sailing.

Flood concedes that IFRS hurdles caused some ‘restatements around the
company’s P&L and our balance sheet’. The standards also built up a lot of
property valuation work demands, but Flood says that it does not fundamentally
cause John Lewis too much trouble: ‘In terms of its impact on how we make
decisions, absolutely not.

‘Does it keep us occupied? Yes, but that’s what we’re paid to do. We deal
with lease premiums and amortise them, but we’re not beholden to the City. But
it’s part of doing the job. Our decision-making is driven by the right thing to
do to be able to give our partners the bonuses that they expect, so we just get
on with it.’

Her ‘can-do’ approach is reflected in her views on the age-old issues that
plague the accountancy profession. Flood says she has never come across the
glass ceiling. On the contrary, she sees being a being a woman as an advantage
in terms of coupling good analytical skills with a good people approach. Still,
the choices around the work-life balance are pretty key in her book. ‘I want to
make sure that I don’t wake up in 20 years’ time with a stellar career but
missed seeing my children grow up. That’s a choice that we all have to make
whether you’re a man or a woman.’

She also refuses to subscribe to the theory that FDs can make easy scapegoats
when things head south.

‘When things are going badly, your FD is your best friend. They are the
people who are going to help you work your way through it. As an FD your role is
to have solutions to questions like: “What can we do? How can we grow? Where do
we need to invest? How do we trim costs but not in a way that’s going to stop
the growth of the business?”’

Flood admits there are still limitations to a life shielded from the
unforgiving spotlight of the City. Changing the perceptions of finance is tough,
especially in a business that’s based around partners and customers, she says.

‘Historically finance has been seen as a something of a gatekeeper; a bit of
a negative force. We need to make people realise that we’re a force for good,
not necessarily a blocker for what they want to achieve.’

Flood describes herself as ‘time-poor’. As a loyal FD should be, all her gift
buying is done through John Lewis Direct, the company’s booming online arm. When
working in harmony with Waitrose Ocado and Greenbee, the other parts of the John
Lewis Partnership is accounted for, the scale of Flood’s task comes into sharp
relief.

After the recent £61.5m Oxford Street store overhaul, Flood is now gearing up
for the next stage of John Lewis’ growth. The chain is rolling out a massive
expansion programme starting with the opening of a store in Cambridge three
times larger than the old one. But the FD is keeping investment levels firmly
under wraps.

‘I’m not sure that it is in the public domain, but it’s a very substantial
investment.’ To give an impression of the scale of the project, 11 of the John
Lewis outlets are worth £100m. ‘We expect a longer payback on our investment
than the majority of our competitors. We’re building stores that will be here in
a 100 years, not stores that will disappear off the high street after five.

‘It really feels like we’re about to see the results of our investment coming
through. The pace is really hotting up.’

Its interims showed that retail sales were up by 6.1% to £1.2bn, and its
Oxford St outlet raked in £1m in a single day at the end of September ­
million-pound days usually come nearer to Christmas.

With the ambitious 12-store relocation and opening project stretching until
2013, Flood has also pledged her future to the prospering chain for the long
haul: ‘I think it’s our time now at John Lewis. We’re in a great position. I’m
helping the business invest a lot of money, so I want to be here for that.’

Avoiding a Christmas turkey

With Christmas on the way, seemingly trivial items such as upside-down
Christmas trees (tipped to be the big thing in 2007) hold the key to success in
a crucial period on the high street. It’s a standard feature of life as a high
street retailer that when something undergoes a revamp or an overhaul, the
process is lived out very much in the public eye, and the same applies to John
Lewis. It still has a reputation to uphold with customers and market watchers
despite not having to answer to the City.

‘Having really clean stock is so important. Any FD who’s been in retail a
long time knows the importance of when something hasn’t sold you, don’t just put
it back in the stock room and keeping bringing it back out. We have a big
clear-out twice every year and mark down any products that don’t work out.’

If anything, John Lewis hasn’t been as ambitious as it could have been in
backing the products that have ended up flying of the shelves. ‘We’ve been a bit
tentative in the past,’ says Flood. ‘With the Black Christmas tree two years ago
we didn’t buy enough and then we had to back it with buying more. The customers
always surprise us. We get great products and they sometimes want more.

‘Since November 2005 we’ve been outperforming the rest of the market and
we’ll just keep on doing that. Our role in finance to provide the analytical
decisions that help us grow and also to provide the rigour and cost control to
make sure that growth floats through to the bottom line. From that, the bottom
line flows into our partners’ bonuses.’