John Lewis Partnership staff will see their bonuses cut for the fifth year in a row to just 5 per cent of their salary, after the department store suffered a slump in annual profits.
Emerging as the latest high-street casualty, John Lewis and Waitrose’s 85,000 strong partnership workforce will see their bonus cut from 6 to 5 per cent of their pay packet, down from 17 per cent in 2013.
With the retailer’s finances struggling, the workforce will share a pot of £74million for the last year, compared to £89.4million a year earlier.
Reduced: John Lewis Partnership staff will see their bonuses cut for the fifth year in a row to 5 per cent of their salary
The last time the group’s partnership bonus was lower was in 1954, when it was 4 per cent.
‘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’ all played their part in the decision to reduce bonuses, the group said.
In the last year, John Lewis’ annual pre-tax profits fell by 77 per cent to £103.9million after a number of one-off charges are taken into account.
Profit, before the partnership bonus, tax and exceptional items, dropped 21.9 per cent to £289.2million.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said it had been a ‘challenging year.’
He warned the group expects ‘further pressure on profits’ over the year ahead amid volatile trading conditions.
He added: ‘We said in January 2017 that we were preparing for tougher trading conditions, with weakness in sterling feeding through into cost prices.
Warning: The group said it expects profits to continue to suffer amid ‘volatile’ conditions
Impact: ‘Heavy snow’ last week ‘significantly impacted’ John Lewis sales, the group said
‘This was why we chose to reduce the proportion of profits paid as partnership bonus last year so as to absorb these impacts while continuing to invest in the future and in strengthening our balance sheet.’
While cutting bonus payments, the group said it was ‘committed’ to increasing pay rates. It said: ‘As at January 2018, the average hourly rate of pay for a non-management Partner was £8.91.’
Over the last year, John Lewis’ like-for-like sales increased by 0.4 per cent, while Waitrose’s increased by 0.9 per cent.
The group said John Lewis sales had been ‘significantly impacted’ by the ‘heavy snow’ last week.
Looking ahead, the group expects trading to remain ‘volatile’ over the next year, ‘with continuing economic uncertainty and no let up in competitive intensity.’
‘We therefore anticipate further pressure on profits’, the group added.
Troubled times: Sir Charlie Mayfield, chairman of the John Lewis Partnership, said it had been a ‘challenging year’ for the group
The pressure on high-street retailers has become clear to see in recent weeks, with increasing numbers of former stalwarts crumbling amid the growth of online competitors, soaring costs, weak sales and high rental and business rates.
After failing to pay a £15million VAT bill, Toys R Us plunged into administration at the end of last month, putting 3,000 jobs at risk.
Maplin then became the second company of the day to collapse into administration, putting a further 2,500 jobs at risk.
On Wednesday, fashion group New Look announced plans to close 60 stores and slash rental costs at 400 of its sites, putting 980 jobs at risk.
Collapsed: Toys R Us plunged into administration at the end of last month, putting 3,000 jobs at risk