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.
It blamed poor home sales, discounting, higher IT costs and the cost of opening two new stores last year for the drop.
John Lewis’ structure is unique. It is owned by its staff, known as partners.
John Lewis’ famously promises that is “never knowingly undersold”, meaning it matches its High Street rivals’ prices.
- What’s making life hard for John Lewis?
- John Lewis staff bonus in doubt
The partnership said “near constant discounting” from rivals had hit profits, particularly in its department store shops.
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.
But 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”.
John Lewis’ statement said: “We saw near constant discounting [at the John Lewis stores] across many categories from October onwards in response to the combination of subdued demand, excess retail space and some other retailers’ distress.”
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.
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.”
Hargreaves Lansdown analyst Laith Khalaf said the fact that John Lewis was struggling showed how bad the situation was.
“If the bellwether John Lewis is creaking, you can be sure others are feeling the pain.
“In the short term, things don’t look like getting much better, but further out, John Lewis may ultimately pick up market share from others who fall by the wayside. A larger slice of the pie could be the reward for staying the course, but what remains to be seen is just how big a pie is left after the current shift in retail washes through the system.”
One brighter spot in the results was Waitrose.
But it said that Waitrose had performed well, with like-for-like sales at the supermarket up 1.3% and profits up 18%.
However, it said it had sold off five of its Waitrose stores to rival retailers:
•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)