John Lewis profits fall amid tough retailing backdrop

John Lewis cut its partners' bonus after suffering a slide in profits. Picture: Stephen Kelly/PA Wire
John Lewis cut its partners' bonus after suffering a slide in profits. Picture: Stephen Kelly/PA Wire
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John Lewis Partnership posted a near-11 per cent slide in yearly profits yesterday as it was hit by a tough trading backcloth, higher pension charges and lower property profit.

The group, which owns the eponymous department store chain and Waitrose supermarkets, cut staff bonuses for 91,500 employees – or partners – to 10 per cent of their annual salary, equivalent to five weeks’ pay, and the overall pot was worth £145 million.

The payout was cut for the third consecutive year, with staff handed 11 per cent in the year to end-January 2015, 15 per cent the year before and 17 per cent in 2013.

Profits at John Lewis Partnership, which is owned by employees of both retail chains, fell to £305.5m in the year to 30 January 2016, down from £342.7m in the previous 12 months. Waitrose’ profits fell to £232.6m from £237.4m, as like-for-like sales dropped 1.3 per cent amid a deflationary food retail environment and pressure from the supermarket discounters.

The company said it expected the deflationary environment to continue, while Mark Price, the outgoing MD of Waitrose, noted the recently announced tie-up between rival Morrisons and online giant Amazon.

“Amazon have got very deep pockets, who knows what they will do,” Price said. “If Amazon have got $5 billion to throw at food retail they are going to be a threat to anyone in the market.”

He added that society was seeing the biggest changes in the food retailing market “since the 1950s and the introduction of supermarkets”.

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John Lewis Partnership chairman Sir Charlie Mayfield said he believed the group had delivered a “healthy trading performance” despite deflation in grocery of minus 2.6 per cent in the year, and that he thought falling prices still had some way to run.

John Lewis department stores saw operating profits edge down 0.1 per cent to £250.2m as like-for-like sales grew 3.1 per cent. The outlet in St James Centre, Edinburgh, has just started a multi-million pound refurbishment that is likely to go on for a number of years.

Andy Street, the chain’s MD, said John Lewis had seen growth in fashion, home and technology. There was a 17 per cent surge in online trading at the business last year, while in-store sales were down 1 per cent.

In the opening weeks of the new financial year, John Lewis’s same-floorspace sales have lifted 3.6 per cent, while like-for-like sales at Waitrose are up 0.4 per cent.

Mayfield would not be drawn on the government’s defeat this week on a proposed extension of Sunday retail trading hours in England via delegation of powers to local councils.

“We did not lobby for it or against it, we had a neutral stance,” he said. Mayfield added that he expected the group to perform “comparatively well against the market” in the coming 12 months.