The John Lewis Partnership has announced a 77% drop in annual profits and has cut the annual bonus given to staff.
Pre-tax profit for the year to 27 January fell to £103.9m while the employee-owned partnership’s bonus scheme fell to 5% of salary – down from 6% for 2017/18 and 10% the year before that.
Profit before partnership bonus, tax and exceptional items was also down 21.9% to £289.2m, largely due to lower gross margins in Waitrose driven by the weaker exchange rate and commitment to competitive pricing. Profit before partnership bonus and tax as a result fell by 67.2 to £177.9m.
Waitrose saw like-for-like sales grow by 0.9% but at the expense of a 42% decrease in operating profits while department store John Lewis saw 0.4% sales growth and a slight increase in profits of 4.5%.
Sir Charlie Mayfield, Chairman of John Lewis Partnership, said: “As we anticipated, 2017 was a challenging year. Consumer demand was subdued and we made significant changes to operations across the Partnership which affected many Partners.
“However, their hard work throughout the year was key to delivering gross sales of £11.60bn, up 2.0%, with like-for-like increases in both Waitrose and John Lewis. Profit before partnership bonus, tax and exceptional items was down 21.9% mainly as a result of intensifying margin pressure in Waitrose.”
“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.
“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. 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.”