The John Lewis Partnership has slashed its staff bonus despite posting a surge in full-year pre-tax profits.
The group’s profit before tax rocketed 65.4% to £488.2m during the 52 weeks ending January 28, while its profit before tax, bonus and exceptional items grew 21.2% to £370.4m.
But the Partnership cut the bonus to 6%, having warned in January that it was likely to be “significantly lower” this year.
The board decided to retain more of its profits “in order to strengthen [its] balance sheet.”
Chairman Sir Charlie Mayfield said doing so would allow the business to “maintain our level of investment in the face of what we expect to be an increasingly uncertain market this year, while absorbing the costs associated with adapting the Partnership for the future.”
The John Lewis department store business recorded a 2.7% uplift in like-for-like sales across the year, as revenues rose 3.2% to £3.78bn.
But its operating profit before the bonus and exceptional items fell 2.8% to £243.2m, following investment in its supply chain.
Sister retailer Waitrose suffered a 0.2% dip in like-for-like sales over the same 52-week period, but total revenues were up 2.6% to £6.24bn.
The upmarket grocer’s operating profit before the bonus and exceptional items advanced 9% to £253.5m, driven by “effective management of costs” and improved productivity within its stores, supply chain and head offices.
The Partnership hailed market share gains for both its businesses, but warned that “trading pressures will continue” in the coming year as a result of “wider changes taking place in retail.”
It said the rate of change in selling prices was likely to be “significantly slower” than the rate of change in input costs, as a result of the tumbling value of the pound.
The business also pointed to the continued shift from shops to online as a “major influence” on the market.
Mayfield said the factors were “significant for the outlook where we expect both inflationary cost pressures and competition to intensify in the market as a whole.”
He added: “In addition, we expect our short-term profits to be impacted by significant one-off costs of change as we accelerate aspects of our strategy to ensure the Partnership’s success.
“However, we start from a position of strength and our plans will navigate the Partnership through the uncertainty in the year ahead.”