The owner of John Lewis and Waitrose is exploring turning its surplus retail space into affordable housing as the growth of online shopping forces it to close or scale back stores. Sharon White, who took over as John Lewis chairman in February, has embarked on an overhaul of the retail group, which has suffered a collapse in profits. In a letter to staff, White said declining profits in the retail industry necessitated a push into services, including new areas such as private rented housing. “As we repurpose and potentially reduce our shop estate, we want to put excess space to good social use,” she said. “We are exploring with third parties the concept of new mixed-use affordable housing.” A recent report by the Social Market Foundation (SMF) thinktank said that rather than trying to revitalise town centres in their current form the government should look to turn empty shopping parades into residential hubs. John Lewis is closing eight of its 50 department stores, including large outlets in Birmingham and Watford, and as White updated the group’s 80,000 partners – as staff who work for the mutual are known – on the progress of a strategic review begun in March she signalled more Waitrose closures may be on the way. “We expect to see continued rebalancing of [Waitrose] stores, opening new ones where we see strong customer demand, and potentially closing others where demand wanes,” said White. “Our existing stores will be updated to meet customers’ expectations.” Waitrose has announced three rounds of store closures in the past two years, with a total of 17 of its supermarkets closing. The lockdown has fuelled the growth of online food sales and Waitrose expects its website to grow rapidly to account for a fifth its business, compared with 5% currently. White said the retailer wanted to make Waitrose products, which include the upmarket Duchy Organic and No 1 brands, available elsewhere. She suggested the convenience market could be a focus of this push because Waitrose had less of a presence in this area. It would also start stocking Waitrose products in more John Lewis shops and vice versa. Another potential growth area it identified was horticulture, and the company said it was examining how it could build a new business out of prize assets such as the Leckford estate – the 1,600-hectare farm near Stockbridge in Hampshire that was home to the company’s founder, John Spedan Lewis, who signed away his ownership rights to create the partnership. It is also looking at the circular economy which White said was a growing priority for customers. Options include renting out products or starting a marketplace to sell used products. White previously warned the company was unlikely to pay its annual staff bonus next year as it grappled with self-inflicted problems as well as those caused by the coronavirus pandemic, which forced its department stores to close for several months. The annual payout – which distributes the same proportion for everyone from the chairman to shelf stackers – is seen as a key part of the employee-owned group’s culture. “As you all know, these are testing times, with profits this year and next likely to be challenged,” said White in the update to staff, which also tried to strike an optimistic note about the group’s future. “But the beauty of being a partnership is that we are able to take a long-term view. The strategic review should see green shoots in our performance over the next nine to 12 months, and our profits recovering over the next three to five years.”