John Lewis has slashed its employees’ annual bonus to 3% as the department store recorded a 45.4% drop in underlying profits to £160m from £292.8m the year before.
In the company’s unaudited results for the year ending 26 January 2019, it attributed its drop in profits to the “significant” operating profit decline in John Lewis and Partners, down £143.1m (55.5%) to £114.7m.
It said this was driven by weaker home sales, a lower gross margin, increased IT costs and running property costs. Each of these factors were said to impact profit by around a quarter of the year-on-year decline. Despite this, the company reduced its total net debts by £401.3m
Sir Charlie Mayfield, partner and chairman of the John Lewis Partnership, said: “In line with expectations set out in June, our Partnership profits before exceptionals have finished substantially lower in what has been a challenging year, particularly in non-food.
“Operating profit recovered strongly in Waitrose & Partners, up 18% (to £203.2m), mainly due to improved gross margins. However, it was down sharply, by 56% (to £114.7m), in John Lewis & Partners because of weaker Home sales, gross margin pressure, higher IT costs, the property impact of new shops and lower profit on asset sales.”
He added: “This is part of our strategy to build up our cash reserves as a defence against uncertainty in the economy and to enable us to maintain annual investment at £400m-£500m per year.”