John Lewis bonus lowest since 1954 as profits plunge
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PA
John Lewis has paid out its lowest bonus to staff since the 1950s as profits plunged last year amid “challenging” trading.
The retail partnership – which includes Waitrose supermarkets – said staff would receive a 3% bonus, the lowest since 1954 when workers received 4%.
Profits at the partnership sank last year by more than 45% to £160m.
The firm also said that it had sold off five of its Waitrose stores to rival retailers.
The company said the overall retail market continued to be “challenging”.
“That’s evident in our results, especially in John Lewis & Partners, where we saw near constant discounting across many categories from October onwards in response to the combination of subdued demand, excess retail space and some other retailers’ distress,” it said.
John Lewis’ structure is unique. It is owned by its staff, known as partners.
Typically in profitable years, staff at the 350 Waitrose and 51 John Lewis stores receive a share of the profits. In the very best years, these bonuses can add the equivalent of a few months’ worth of pay.
The annual staff bonus has been reduced every year for the past six years due to difficult trading conditions.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said the lower bonus would help the company to preserve cash and invest “to cope with the continuing uncertainty facing consumers and the economy”.
The partnership said “near constant discounting” from rivals had hit profit, particularly in its department store shops.
John Lewis’ famously promises that is “never knowingly undersold”, meaning it matches its High Street rivals’ prices.
Like-for-like sales, which exclude sales from new stores, fell 1.4% in its department stores last year.
It said weaker home sales in particularly had contributed to the drop, with “subdued” consumer confidence hitting demand for “big ticket and bespoke items”.
Overall, it said its poor performance had been driven by a triple whammy of lower margins – the amount of profit it makes on items – due to discounting, higher IT costs and the cost of opening two new stores last year.
But it said that Waitrose had performed well, with like-for-like sales at the supermarket up 1.3% and profits up 18%.
The Waitrose shops being closed are:
•Ashbourne, Derbyshire (7,710 sq ft)
•Barry, Vale of Glamorgan (25,909 sq ft)
•Blaby, Leicestershire (6,773 sq ft)
•Teignmouth, Devon (19,374 sq ft)
•Torquay, Devon (12,508 sq ft)
The department store model has been under pressure for several years. BHS collapsed in 2016, while House of Fraser was bought out of administration by House of Fraser last year. Earlier this week, struggling department store chain Debenhams issued its fourth profit warning in a little over a year as its sales continued to fall.
Sir Charlie – who is stepping down next year – said the current High Street problems were “an inevitable market adjustment which will require greater clarity on whether brands are competing on scale or difference.”
