Bonuses for 84,000 staff at John Lewis and Waitrose have been cut for the fifth year in a row.
Employees will get a 5% bonus, down from 6% last year and the lowest since the 4% paid out in 1954. Annual group profit, before the partnership bonus, tax and exceptional items, fell 21.9% to £289.2m. John Lewis Partnership chairman Sir Charlie Mayfield said 2017 had been a “challenging year”, as expected, with “subdued” consumer demand. He said weakness in sterling had led to higher costs, putting pressure on the business’s profit margin. The partnership said it had been hit by exceptional costs of £282.5m, including £111.3m to cover the restructuring of branch, distribution and retail operations. Sir Charlie said:
This was why we chose to reduce the proportion of profits paid as partnership bonus last year so as to absorb these impacts while continuing to invest in the future and in strengthening our balance sheet,
He said the firm remained committed to increasing pay rates for non-management staff, and that the average hourly rate of pay for a non-management workers was £8.91.
Volatile year ahead
Like-for-like sales – which strip out the impact of store openings – at the John Lewis department stores were up 0.4%. At Waitrose, sales returned to growth, with like-for-like sales rising 0.9%. Gross sales for the full-year period were up 2% at £11.6bn.
We expect trading to be volatile in 2018-19, with continuing economic uncertainty and no let up in competitive intensity. We therefore anticipate further pressure on profits,” the company said.
Redundancy payments cost it £72.8m in 2017. The partnership said 1,440 members of staff had left the business through redundancy in the past year.
The company said that its John Lewis stores had increased market share in fashion, homewares, electrical goods and home technology, with sales in the latter category up by 2.6%. Fashion sales climbed 3.2%, boosted by a strong performance in womenswear, up 5.0%. Sales of its own-brand womenswear rose 14.9%. But homeware sales were down 0.8%, with soft demand in categories such as fitted furniture, fitted flooring and upholstery.
These results show that conditions of the High Street are very tricky at the moment
said Richard Lim, chief executive of analysts Retail Economics. “Consumer spending generally is a lot softer, while inflation is still near a five-year high.” He said research by his firm showed that consumers were also worried about Brexit and their own low levels of personal savings. “People’s personal finances are under pressure”, Mr Lim said that in the year ahead John Lewis would be looking very closely at its costs and at ways of potentially bringing these down.