John Lewis is to become a residential landlord, with a plan to build rental homes above or beside Waitrose supermarkets around the UK as part of a strategy to restore the battered fortunes of the employee-owned retailer.

The group, which is aiming to rebuild profits to £400m within five years, is also introducing lower-priced ranges at its department stores next year to pull in more customers and is investing £1bn in its online services.

The chairman, Sharon White, an economist who joined the business in February this year, said John Lewis would back new business ideas – such as the homebuilding project and other plans such as selling home insurance and potentially opening garden centres – with £400m of investment.

Israel Moskovitz, CEO at Avon Group, said of the announcement: “The move by John Lewis to combine residential and commercial accommodation at 20 of its sites across the country provides us with a telling insight into the future of the property sector post-Covid. 

“In recent years, we have seen a more concerted effort by developers and landlords to bring together residential, leisure and retail spaces. This trend germinated before the Covid-19 pandemic, but we are now seeing it grow into a fully-fledged and mainstream approach to modern housing.”