Wednesday, 26 September, 2018

Staff bonus slashed as John Lewis reports 77 per cent profit fall

Sir Charlie Mayfield Sir Charlie Mayfield
Melissa Porter | 09 March, 2018, 05:29

He added: 'We therefore anticipate further pressure on profits'.

United Kingdom retail group John Lewis Partnership, which operates John Lewis department stores and the Waitrose supermarket chain, saw profit before exceptionals fall 21.9% to £289.2 million in 2017, according to its full-year results, released today.

Waitrose achieved gross sales of £6.75 billion past year, up 1.8% compared to 2016, with like-for-like sales, excluding fuel, increasing by 0.9%.

The department-store chain warned of further pressure on profits after earnings before exceptional items fell 22 percent in the latest fiscal year.

For the first five weeks of the year, Partnership gross sales were up 0.6% on last year.

John Lewis' main rivals Debenhams, House of Fraser and Marks & Spencer are all in the midst of a turnaround strategies and restructuring to return it to growth, while Waitrose's Big 4 rivals have all announced cut backs to staff numbers as they take a hit from rising costs and inflation.

The employee-owned company also reported that staff, who are known as partners, will receive a bonus of just 5% this year, its lowest level in 63 years.

Sales at both retail chains were "significantly impacted" by heavy snow in the United Kingdom last week.

Before one-off items, pretax profits fell almost 22% to £289.2m, largely as a result of lower profit margins at the Waitrose supermarket chain driven by the fall in the value of the pound, which has increased costs and a "commitment to competitive pricing".

He added: "We said in January 2017 that we were preparing for tougher trading conditions with weakness in Sterling feeding through into cost prices, putting pressure on margin, and much higher exceptional costs as a result of an acceleration of planned changes". However, the Partnership "will see benefits this year from the many changes we implemented in 2017/18", and the faster delivery of key innovations. Waitrose recorded 2.4% growth in like-for-like sales, excluding fuel, and John Lewis same store sales were down 3.4%.

Following a profit warning in January, Sir Mayfield said the business chose to reduce the proportion of profits paid as Partnership Bonus previous year in a bid to absorb the impact of tougher trading conditions.

"We did both and I am pleased to say that despite lower profits, strong cash flow has enabled us to reduce our total net debts".

Against a "backdrop of a challenging market", Home sales were down 0.8%.