UK's John Lewis says annual profit hit by competitive pressures

John Lewis cuts staff bonus for the fifth year in a row as it reports a fall in profits

A "particularly strong" performance in womenswear was not enough to offset a 77% drop in profit at the John Lewis Partnership for the full-year.

Staff still on board after the latest round of redundancies will be handed a bonus of five per cent of annual salary, with 85,500 partners sharing out a pot worth £74 million, down from £89.4 million the previous year.

The John Lewis Partnership has cut its staff bonus to the lowest level in 64 years after annual profits plunged at the group, which owns Waitrose and a chain of department stores.

In the year to January 27, gross sales across the partnership rose two per cent, with like-for-likes growing at 0.4 per cent and 0.9 per cent at Waitrose and John Lewis respectively.

"We expect trading to be volatile in 2018/19" the company reports, with continuing economic uncertainty and no let up in competitive intensity.

Chairman Sir Charlie Mayfield said he expects the number of staff will "continue to decline" even as the firm slashed headcount by 1,440 a year ago. Profit before partnership bonus and tax as a result fell by 67.2 to £177.9m.

In a statement issued today (8 March), Sir Charlie Mayfield, Chairman of John Lewis Partnership, said that 2017 had been a "challenging year" with subdued consumer demand and profits were down "mainly as a result of intensifying margin pressure in Waitrose".

He pointed to weakness in sterling putting pressure on cost prices, margins and leading to higher exceptional costs as it sped up changes to the business.

Lower profit margins at the Waitrose driven by the fall in the value of the pound cut pretax profits by almost 22%.

He added that the company had chosen to cut the proportion of profits paid as partnership bonus in order to absorb the impact of tough trading "while continuing to invest in the future and in strengthening our balance sheet".

John Lewis didn't provide margin figures but said margins were squeezed by its decision to not pass on cost inflation to its customers via price increases, and also by its investments in its customer experience.

At John Lewis gross sales were up 2.2 per cent to £4.84bn, with like-for-like sales growth of 0.4 per cent.

As a result, the retail group is anticipating further pressure on profits.

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