John Lewis cuts staff bonus to 12-year low after Waitrose profits tumble

Department store group cuts bonus by 4% in the wake of a tough year for its supermarket chain, which posted a 24% loss in operating profits

John Lewis employees will receive their lowest bonus for 12 years after the partnership cut the annual payout for its 93,800 staff to 11% of salary.

Employees of the John Lewis Partnership, which owns the Waitrose supermarket chain as well as the flagship department store, will share £156.2m in bonuses this year, £47m less than last year, as profits at Waitrose dived after a competitive year for grocery retailers.

In a tough year for the partnership, profits excluding tax, the bonus and one-off items dropped 9% to £342.7m.

The bonus, which was announced to cheers from staff at its flagship John Lewis department store on London’s Oxford Street on Thursday morning, is the lowest since 2003 when staff received 10% of salary. Last year staff received 15%. However, thanks to new legislation, this year no employee will pay tax on their bonus up to £3,600..

While profits rose at John Lewis’ department stores, the Waitrose chain suffered from a fierce price war among supermarkets and heavy investment in new stores and technology.

The grocer posted a 24% fall in operating profits to £237m. Sales at established stores rose 1.4%, ahead of the market, and market share grew to 5.4%. But Mark Price, managing director of Waitrose, said cutting prices to compete in a “highly competitive and deflationary market” had cost the business between £35m and £45m.

Price said he expected the market to remain tough and profits to remain under pressure for some time to come. “To quote Churchill: ‘This is not the end, this is not even the beginning of the end but perhaps it is the end of the beginning.’ There are dramatic changes in food retail, in shopping online, using convenience stores and eating out more. That change is going to take a long time to work through and not going to be over this year or next year. It is going to take the best part of a decade in my view.”

He said that Waitrose would fight back by keeping prices competitive, offering high-quality fresh food and offering more services such as in-store cafes and restaurants and online ordering. He said the company did not intend to end its contract to supply online grocery specialist Ocado under a break clause which comes into play in 2017.

The challenge for Waitrose was highlighted in the latest market data from Kantar Worldpanel for the four weeks to 1 March which showed that Waitrose suffered a loss in market share for the first time since 2009.

John Lewis Partnership’s bonus payouts since 1920

The bonus payout started in 1920. It was suspended during the second world war and the early 1950s recession, and peaked at 24% of salary in the 1980s.

Priscilla Aldridge, who has worked for Waitrose as an assistant section manager for less than a year and so is receiving her bonus for the first time, said the payment would pay for driving lessons. “It’s wonderful to be part of a partnership. There’s a really special atmosphere in store because we feel we co-own the business.”

Mo Miah, who works for Waitrose in Marylebone, central London, said: “Eleven percent is not disappointing. Last year a lot had to be taken into consideration like the pension and holiday payments and we’re opening lots of new branches.” He said he would be spending his bonus on car insurance.


Julia Kollewe and Sarah Butler

The GuardianTramp

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