John Lewis Partnership staff bonus slashed as profit nosedives 45%

John Lewis profits
// John Lewis Partnership’s full year profit before bonuses and tax plunges by 45%
// Waitrose like-for-likes sales up 1.3% while John Lewis like-for-likes went down 1.4%
// Overall partnership revenue up 1%
// Staff bonus slashed to just 3% – the lowest since the mid-1950s

John Lewis Partnership has revealed a double-digit crash in full year profits amid mixed like-for-like sales performance, prompting the firm to slash staff bonuses to the lowest levels since the mid-1950s.

According to its results for the year ending January 26, the parent company of Waitrose and John Lewis saw profit plunge by 45.4 per cent year-on-year.

This meant profit before staff bonus, tax and exceptional items stood at £160 million for the full-year period, a stark contrast to the £292.8 million recorded the year prior.

The partnership’s operating profit for the year also plummeted.

Before staff bonus and exceptional items, operating profit came in at £227 million, a 37.7 per cent drop compared to the prior year’s figure of £364.4 million.

On the other hand, operating profit before staff bonus went down by 9.5 per cent.

The profit declines were driven by a 55.5 per cent year-on-year crash in operating profit from John Lewis, compared to Waitrose’s 18.1 per cent growth.

However, the partnership’s overall profit before tax grew 9.2 per cent year-on-year.

Meanwhile, like-for-like sales were up 1.3 per cent year-on-year at Waitrose and down 1.4 per cent in John Lewis.

The partnership’s overall full year revenue grew by just one per cent year-on-year to £10.31 billion.

This was underpinned by a 1.2 per cent growth in revenue from Waitrose compared to a marginal 0.7 per cent increase from John Lewis.

John Lewis Partnership chairman Sir Charlie Mayfield said the results came after what had been a “challenging year” for the firm, and echoed forecasts it had set out in June.

He said the board has awarded staff a bonus worth three per cent of their annual pay, compared to the five per cent awarded last year.

The latest bonus is also the lowest the partnership has awarded since the mid-1950s, when it stood at four per cent.

“This enables us to continue debt reduction, maintain our level of investment and retains solid cash reserves to cope with the continuing uncertainty facing consumers and the economy,” Mayfield said.

He attributed the drop in the partnership’s profits to weaker sales in John Lewis’ home department, as well as gross margin pressure, higher IT costs, and lacklustre income from new property and asset sales.

However, he said the company reduced total net debts by £401.3 million, and successfully raised the average hourly rate for non-management staff to £9.16, 17 per cent above the National Living Wage rate.

“We expect that average hourly rate of pay to increase by around 4.5 per cent following our April 2019 pay review,” Mayfield said.

He also highlighted areas where investment had paid off, such as the launch an own-brand womenswear range and an expansion of the personal styling service boosting John Lewis’ market share in the fashion sector.

With Waitrose, significant online investment, new customer smartphone apps and customer delivery services led to a strong increase in online grocery sales of 14 per cent, seemingly preparing the grocer to stand on its own two feet in the ecommerce sector before it ends its longtime partnership with Ocado in September 2020.

“We expect 2019 trading conditions to remain challenging but are confident in our strategic direction and customer offer across both brands,” Mayfield said.

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