John Lewis Partnership Cuts Staff Bonuses Amid Toughening Trading Conditions

Staff at John Lewis and Waitrose have had their annual bonus cut for the fourth year in a row as the partnership warned that it faced an increasingly uncertain market this year, while absorbing the costs associated with adapting the business to future shopping trends.

Employees will now receive a bonus of 6% this year, down from 10% last year. The figure was revealed after the John Lewis Partnership reported a rise in sales and profits for its last financial year.

Profit, before the partnership bonus, tax and exceptional items, rose 21.2% to £370.4m, although in a large part the increase was due to lower pension accounting charges. Excluding these charges, profits before exceptionals rose just 1.9% on total sales up 3.2% to £11.37bn.

Total sales at Waitrose rose 2.7% to £6.63bn, although like-for-like sales decreased by 0.2%. However, the group stressed that it had grown market share and customer numbers with like-for-like performance improving in the second half of the year.

The chain’s operating profit before exceptional items was up 9% to £253.5m, boosted by cost savings and improved productivity in its stores, supply chain and head offices.

Waitrose opened five supermarkets and five convenience shops in the year, and also closed two convenience outlets. Last month, the group announced the proposed closure of four underperforming supermarkets and two convenience shops. For its current financial year, Waitrose plans to open two supermarkets and five convenience shops – the first of which, Faringdon (Oxfordshire) opened in February.

Meanwhile, the John Lewis department store chain continued to outperform the market with total sales up 4% to £4.74bn and like-for-like sales growing a strong 2.7%. However, operating profit before exceptional items was down 2.8% at £243.2m. The group blamed the fall on investment it made in its supply chain to support growth of its multi-channel operations.

For the first five weeks of its new financial year, Waitrose total sales were up 0.4% but like-for-like sales were down 1.4%. At John Lewis, sales edged up 0.5% but like-for-like sales also slipped 1.4%, suggesting the recent slowdown in consumer spending is starting to bite.

The partnership’s Chairman Sir Charlie Mayfield said: “In the year ahead, trading pressures will continue as a result of the wider changes taking place in retail. The two major influences are pricing, where the rate of change in selling prices is likely to be significantly slower than the rate of change in input costs as a result of weakness in the Sterling exchange rate, and the continued shift from shops to online. These factors are significant for the outlook where we expect both inflationary cost pressures and competition to intensify in the market as a whole.”

He added: “In addition, we expect our short-term profits to be impacted by significant one-off costs of change as we accelerate aspects of our strategy to ensure the Partnership’s success. However, we start from a position of strength and our plans will navigate the Partnership through the uncertainty in the year ahead.”