John Lewis bonus lowest since 1950s as profits plunge
John Lewis has paid out its lowest bonus to personnel since the 1950s as profits plunged final 12 months amid “challenging” buying and selling.
The retail partnership – which contains Waitrose supermarkets – stated personnel would obtain a three% bonus, the lowest since 1953 when employees were given no bonus.
Profits on the partnership sank final 12 months via greater than 45% to £160m.
It blamed deficient house gross sales, discounting, upper IT prices and the price of opening two new shops final 12 months for the drop.
John Lewis’ famously guarantees this is “never knowingly undersold”, that means it suits its High Street competitors’ costs.
The partnership stated “near constant discounting” from competitors had hit profits, in particular in its division retailer stores.
John Lewis’ construction is exclusive. It is owned via its personnel, recognized as companions.
Typically in winning years, personnel on the 350 Waitrose and 51 John Lewis shops obtain a percentage of the profits. In the perfect years, those bonuses can upload the similar of a couple of months’ value of pay.
But the once a year personnel bonus has been decreased once a year for the previous six years because of tough buying and selling prerequisites.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, stated the decrease bonus would lend a hand the corporate to keep money and make investments “to cope with the continuing uncertainty facing consumers and the economy”.
What’s long past improper at John Lewis?
Analysis: Howard Mustoe, trade reporter
There are 4 key causes the dep. retailer chain is suffering. It’s “Never Knowingly Undersold” ensure ties its fingers on worth as it suits the cost of a product with competition. There’s additionally the overall “relevance problem” of division shops, with the upward thrust of on-line buying groceries.
And there is the squeeze on earning this is seeing customers reduce on positive kinds of spending. And staying related prices cash – John Lewis has needed to put money into IT, as many different outlets have, to satisfy buyer call for.
John Lewis stated “subdued demand, excess retail space and some other retailers’ distress” had led to special reductions via stores since final October.
Like-for-like gross sales, which exclude gross sales from new shops, fell 1.four% in its division shops final 12 months.
It stated weaker house gross sales particularly had contributed to the drop, with “subdued” shopper self belief hitting call for for “big ticket and bespoke items”.
The division retailer style has been below power for a number of years. BHS collapsed in 2016, whilst House of Fraser was once purchased out of management via Sports Direct proprietor Mike Ashley final 12 months. Earlier this week, suffering division retailer chain Debenhams issued its fourth benefit caution in slightly over a 12 months as its gross sales endured to fall.
Sir Charlie – who’s stepping down subsequent 12 months – stated the present High Street issues had been “an inevitable market adjustment which will require greater clarity on whether brands are competing on scale or difference.”
Hargreaves Lansdown analyst Laith Khalaf stated the truth that John Lewis was once suffering confirmed how unhealthy the location was once.
“If the bellwether John Lewis is creaking, you’ll make sure that others are feeling the ache.
“In the fast time period, issues do not seem like getting significantly better, however additional out, John Lewis would possibly in the long run select up marketplace percentage from others who fall via the wayside. A bigger slice of the pie may well be the praise for staying the direction, however what continues to be observed is simply how giant a pie is left after the present shift in retail washes in the course of the gadget.”
One brighter spot within the effects was once Waitrose. Like-for-like gross sales on the grocery store rose 1.three% final 12 months, with profits up 18%.
However, John Lewis stated it had bought off 5 of its Waitrose shops to rival outlets:
- Ashbourne, Derbyshire (7,710 squareft)
- Barry, Vale of Glamorgan (25,909 squareft)
- Blaby, Leicestershire (6,773 squareft)
- Teignmouth, Devon (19,374 squareft)
- Torquay, Devon (12,508 squareft)
On Brexit, the partnership stated it was once “in a good position for a managed transition”.
But warned an unmonitored transition risked “a strong fall in consumer confidence and the impact that has on trade”.