John Lewis pays lowest bonus since 1953 as profits slump

The department stores and grocery group said profit before tax, exceptional items and the partner bonus fell 23.1% to £123m in the year to January 25, 2020. Gross sales slipped 1.5% to £11.5bn.

The partnership hailed a “solid” performance from Waitrose & Partners during the period. The upmarket grocer’s operating profits before exceptionals and IFRS 16 grew £10m to £213m. However, after excluding property profits of £16m, operating profit was down £6m.

By contrast, John Lewis & Partners’ operating profits before exceptionals and IFRS 16 slumped 65% to £40m, driven by weaker sales across the home and electricals departments, IT investment and pay increases for partners.

The value of John Lewis’ department stores plummeted £123m during the year “as a result of shops playing less of a role in driving online purchases”.

The partnership said it would pay its partners a 2% bonus – the lowest since 1953 – after posting “a weaker performance than we had hoped for” across the group.

New chair Dame Sharon White said the bonus was “prudent and affordable” but also “recognises the contribution made by partners”.

In a letter to partners released this morning, White confirmed she has launched a strategic review of the business in a bid to “reverse our profit decline and return to growth”, but admitted achieving that aim would “require a transformation in how we operate as a partnership”.

White warned that process “could take three to five years to show results”.

Store closures

“We are stepping into a vital new phase for the partnership and I have no doubt we will come through it stronger,” White said.

“The strategic review will focus on how we strengthen our core retail business and develop new services outside retail. 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.”

John Lewis Partnership said it will close three Waitrose stores – in Helensburgh, Four Oaks and Waterlooville – as it kick-starts this process.

The partnership said it hopes to redeploy impacted workers across other parts of the business.

Despite the strategic review, which will be completed by the autumn, White insisted the partnership would continue to be employee-owned, would retain both the John Lewis and Waitrose brands, and would put “exceptional customer service at the heart of what we do”.

White added that the business would “focus on quality and value”, empower staff to “offer products and services that are more local”, and place “even greater emphasis” on its sustainability credentials.

“These are the most challenging but exciting times in retail for a generation. Together we have the opportunity to secure the partnership not just for the next five years but for the next 100”

Sharon White, John Lewis Partnership

White also mapped out her priorities for the 2020/21 fiscal year. She said John Lewis would refresh its homewares proposition to introduce “more inspiration and contemporary ranges [with] improved pricing”.

The partnership will also invest in the John Lewis and Waitrose websites, ahead of the latter’s tie-up with Ocado ending in September.

The retailer said it will recruit 2,400 new workers and is building a new fulfilment centre in Enfield to meet online grocery demand.

White said: “All of us are aware of the challenges in retail. New technology means that shoppers have never had so much choice, value and convenience. That is to be celebrated. And there is a great opportunity for retailers who have an intimate understanding of their customers to respond to them in an agile fashion.

“Every partner can make a difference this year by focusing relentlessly on service – wherever they are in the business. If we get it right, customers will return to shop with us and we’ll earn their lifelong loyalty.

“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.

“These are the most challenging but exciting times in retail for a generation. Together we have the opportunity to secure the partnership not just for the next five years but for the next 100.”