John Lewis Partnership (JLP) has cut its annual staff bonus to the lowest level in 64 years after profit plunged at the group, which owns Waitrose and a chain of department stores.
The company said 85,000 workers, known as partners because they jointly own the business, would share a £74m bonus, equivalent to 5% of annual pay. All partners, from leading executives to Saturday shelf-stackers, receive the same percentage bonus.
Sir Charlie Mayfield, the chairman of JLP, said it had been a “challenging year”.
He blamed the downturn in profit and the staff payout – which has been cut for five years in a row – on subdued consumer demand and “significant changes to operations across the partnership, which affected many partners”. Mayfield said the coming year was likely to put further pressure on profit.
The bonus cut came as profit fell 77% to £103.9m in the year to the end of January. Much of the damage to the bottom line was the result of one-off charges to cover redundancy and restructuring costs.
But excluding those one-off costs, profit was still down 22% to £289m. Waitrose’s results were particularly poor, affected by tough competition in the supermarket business and the higher cost of goods due to the fall in the value of the pound.
Waitrose said it had tried not to pass on all price rises to shoppers. It pointed to the shelf price of butter going up 36% when the cost to Waitrose had increased by 200%. Similarly, the price of British lamb and smoked salmon rose less than 5% for shoppers while the cost to Waitrose went up 25%.
Mayfield said John Lewis now employs nearly 3,000 fewer people and he expected more jobs to go, but the group would be investing more to improve the experience for shoppers.
“This is no time for a defensive crunch. Our whole game plan is to step up to this challenge and we’ll be stepping up the pace of innovation. It’s the only way to win in this market,” he said.
Ideas include training shop staff to promote the department stores through their personal Twitter and Instagram feeds, bringing in dozens more designers and technologists to grow own-label clothing and home ranges, and expanding a handyman service to London.The high street is facing a tough time, with House of Fraser and Debenhams planning to lose some shopfloor space as customers increasingly buy online. Rising costs and a squeeze on disposable income, as inflation outstrips wage rises, are also contributing to retailers’ woes.
John Lewis has continued to open stores, including a small department store in Oxford and a full-size outlet due to open later this month in the extension of the Westfield shopping centre in west London.
But it has slowed expansion, cut jobs and closed some Waitrose stores. Only one Waitrose supermarket and two department stores will open this year, as the group invests more in existing outlets.
Despite the lower bonus, Mayfield said John Lewis was committed to increasing pay for ordinary workers, who earn £8.91 an hour on average, well above the legal minimum of £7.50 an hour for over-25s.
Sales at the department store chain rose just over 2% to £4.84bn. Fashion, beauty and electrical goods sold well. Operating profit before one-off costs increased by 4.5% to nearly £255m.
Waitrose sales were up 1.8% to £6.75bn. But its operating profit plunged 32% to £172m.
