John Lewis cuts staff bonus to 67-year low as profits plunge
John Lewis Partnership has said it will pay out its lowest staff bonus since 1953 as it revealed a 23% profits plunge along with plans to "right size" its store estate.
The group said it will cut its staff bonus for the seventh year running to 2% of annual salary as it posted a 23% plunge in underlying pre-tax profits to £123 million for 2019.
While supermarket Waitrose had put in a solid performance, John Lewis department stores had struggled the company said. "This is a weaker performance than we had hoped for, driven by significantly reduced profitability in John Lewis. Despite a solid performance in Waitrose, it is our third year of declining profit across the Partnership as a whole.
John Lewis operating profits before exceptionals and IFRS 16 were down £75m to £40m, while Waitrose was up £10m to £213m, however excluding property profits of £16m (2018/19: £nil), it was down £6m. Total sales across the group fell by 1.5% to £11.5 billion.
"This year we saw a one-off reduction in the value of our John Lewis shops of £123m, principally as a result of shops playing less of a role in driving online purchases," chairwoman Dame Sharon White said.
White – who took the helm last month – outlined a strategic review and a plan to return the group to profit growth, including “right sizing” its store estate and slimming down its head office.
She said: "As part of this we will also look at ‘right sizing’ our store estate across both brands, through a combination of new formats and new locations; repurposing and space reductions of existing stores; and closures, where necessary."
The group announced that three Waitrose stores will close later this year at Helensburgh, Four Oaks and Waterlooville as part of the overhaul.
White said: “We need to reverse our profit decline and return to growth so that we can invest more in our customers and in our partners.
“This will require a transformation in how we operate as a partnership and could take three to five years to show results.
“We are stepping into a vital new phase for the partnership and I have no doubt we will come through it stronger.”
It had been suggested that White might pull back on the plans of previous chair Sir Charlie Mayfield to merge the management teams of Waitrose and John Lewis and, while she did not confirm that, she did say that head office functions of the two sides of the business would work closer together while their differences must be recognised.
"Future Partnership will slim down our head office functions and promote closer working between Partners in Waitrose and John Lewis. It will cut costs and over time make it easier for customers to shop across the two brands. As we restructure, we will take care not to lose the distinctive nature of the two brands," White said.