John Lewis and Waitrose staff have seen their annual bonus cut to 6 per cent of salary from 10 per cent the previous year, as the partnership prepares for tougher trading conditions ahead, reports Sky News.
The employee-owned outfit had warned of a significant cut in January so it came as no real surprise to staff – known as partners – though it did mark the fourth consecutive fall in the celebrated reward.
The reduction was announced despite a rise in both group sales and profits. Pre-tax profits before exceptional items for the year to 28 January came in 21% higher at £370.4m. Pre-tax profit was 65 per cent up at £488.2m – aided by lower pension charges.
But John Lewis said partners would share a £89.4m pot, equating to three weeks’ wages.
The total last year was £145m.
Partnership chairman Sir Charlie Mayfield said: “Bonus is lower because the board has decided to retain more of our annual profits in order to strengthen our balance sheet.
“This allows us 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.”
John Lewis, like its rivals, is bracing for tougher times mostly linked to the UK’s vote to leave the EU as families face a squeeze from higher prices.
Retailers are under pressure to pass on higher prices for imported goods to customers – goods made more expensive by sterling’s weakness since the referendum.
Profits are damaged if they absorb the extra costs themselves.
John Lewis warned: “In the year ahead, trading pressures will continue as a result of the wider changes taking place in retail.
“The two major influences are pricing, where the rate of change in selling prices is likely to be significantly slower than the rate of change in input costs as a result of weakness in the sterling exchange rate, and the continued shift from shops to online.
“These factors are significant for the outlook where we expect both inflationary cost pressures and competition to intensify in the market as a whole.”
It has already taken action this year to help address costs – saying last month it would axe nearly 400 jobs across its restaurants and home fittings service.
Its results statement said it would find “significant” further savings in contract labour and consultancy support.