The John Lewis Partnership has cut its staff bonus to the lowest level in 64 years after annual profits plunged at the group, which owns Waitrose and a chain of department stores.
The company said 85,000 staff, known as partners because they jointly own the business, would receive a bonus equivalent to 5% of annual pay.
It is the fifth year in a row that John Lewis has cut the bonus. Last year the bonus – which is the same proportion of salary for all workers, from the chairman to Saturday shelf-fillers – was 6%, the lowest level since 1954, when it stood at 4% of pay. The year before it was 10%, the lowest for 13 years.
It followed a 77% fall in annual profits to £103.9m in the year ending 27 January after the retailer took a £111m one-off hit, mainly relating to redundancy and restructuring costs.
Before one-off items, pretax profits fell nearly 22% to £289.2m, largely as a result of lower profit margins at the Waitrose supermarket chain driven by the fall in the value of the pound, which has increased costs and a “commitment to competitive pricing”.
The company said it expected trading to be volatile in the coming year, with “continuing economic uncertainty and no let-up in competitive intensity. We therefore anticipate further pressure on profits”.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said:“As we anticipated, 2017 was a challenging year. Consumer demand was subdued and we made significant changes to operations across the Partnership which affected many partners.
“However, their hard work throughout the year was key to delivering gross sales of £11.6bn, up 2%, with like-for-like increases in both Waitrose and John Lewis.
“We said in January 2017 that we were preparing for tougher trading conditions with weakness in sterling feeding through into cost prices, putting pressure on margin, and much higher exceptional costs as a result of an acceleration of planned changes.
“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. We did both and I am pleased to say that despite lower profits, strong cash flow has enabled us to reduce our total net debts.”
Despite the bonus cut, Mayfield said John Lewis was committed to increasing pay for its ordinary workers who earn an average £8.91 an hour, well above the legal minimum of £7.50 an hour for over-25s.
The hit to John Lewis comes amid a tough time for the high street and department stores in particular. House of Fraser and Debenhams are both planning to close space as shoppers shift to buying online amid rising costs and a squeeze on disposable income as inflation outstrips wage rises.
John Lewis has continued to open stores, including a smaller outlet in Oxford and a full-size department store set to open in the extension of the Westfield shopping centre in west London later this month. But it has slowed the pace of expansion, cut jobs and closed some Waitrose stores.
Sales at the department stores chain rose 2.2% to £4.84bn, with growth of 0.4% at stores open more than a year. Operating profit before exceptional items rose 4.5% to £254.2m, boosted partly by the disposal of a freehold site.
Waitrose sales rose 1.8% to £6.75bn, up 1.8%, with sales at established stores, excluding fuel, up by 0.9%. But operating profit before exceptional items at the supermarket sank 32% to £172m, held back largely by lower margins as it tried not to pass on all cost price inflation to customers and invested in improving stores.