John Lewis staff face bonus cut and further redundancies as profits slump 77%
Staff still on board after the latest round of redundancies will be handed a 5% bonus.
The John Lewis Partnership is set to axe more jobs this year after the department store chain was forced to slash its annual bonus to levels not seen since 1954 following a 77% drop in profits.
Chairman Sir Charlie Mayfield said he expects the number of staff will “continue to decline” even as the firm slashed headcount by 1,440 last year.
“That will be a function of the changing use of technology but also longer contracted hours,” he added.
“The number of partners will come down as a consequence of that.”
The comments came alongside a dire set of full-year results.
Redundancy and restructuring costs in 2017 formed part of a £111.3 million hit that contributed to a hefty fall in bottom-line pre-tax profits, which plunged 77% to £103.9 million after one-off charges.
We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let-up in competitive intensity John Lewis Partnership chairman Sir Charlie Mayfield
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Underlying pre-tax profits at the Partnership – which owns the eponymous department store and upmarket supermarket Waitrose – were down 21.9% at £289.2 million for the year to January 27.
Staff still on board after the latest round of redundancies will be handed a bonus of 5% of annual salary, with 85,500 partners sharing out a pot worth £74 million, down from £89.4 million the previous year.
It marks the fifth straight year of bonus cuts, having gone down from 6% last year and as much as 17% in 2013.
Sir Charlie said it was also the lowest since 1954 when the bonus was set at 4%, but stressed that the company would not shy away from taking that figure down to zero if necessary, in order to secure the “long term future of the Partnership”.
The chairman said it had been a “challenging year” and cautioned that the group expects “further pressure on profits” over the year ahead amid volatile trading.
Sir Charlie added: “We said in January 2017 that we were preparing for tougher trading conditions, with weakness in sterling feeding through into cost prices.
“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.”
The Partnership, which is owned by the employees of the two retail chains, reported a disappointing start to the year for John Lewis, with like-for-like sales for the first five weeks down 3.4% after disruption from last week’s heavy snow.
Waitrose has seen like-for-like sales rise 2.4% since the year-end.
“We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let-up in competitive intensity,” Sir Charlie said.
Annual results showed that gross sales across the partnership rose 2% to £11.6 billion.
John Lewis saw like-for-like sales edged 0.4% higher, while operating profits lifted 4.5% to £254.2 million, but Waitrose saw profits collapse.
The supermarket posted a 32.1% decline in operating profit to £172 million.
Waitrose said the profit fall was down to a decision “not to pass on all cost price inflation” to customers and investments in “customer experience”.
Like-for-like sales at Waitrose grew by a paltry 0.9% as the sector continued to reel from soaring Brexit-fuelled inflation and fierce competition.
The grocery chain responded by lowering the prices of hundreds of products, helping comparable sales growth pick up to 1.1% in the final six months, although this hurt profits.