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Employee-owned UK retailer John Lewis has said it will again not pay its prized staff bonus and warned of job losses despite a rise in annual sales and profits.
The group, which includes the John Lewis department store chain and supermarket business Waitrose, has reported a 73 per cent increase in pre-tax profit to £97mn for the year to January 25.
Sales rose 3 per cent overall to £12.8bn, thanks to a better performance by Waitrose. Sales for this part of the business were up 4.4 per cent to £8bn, largely driven by volume growth rather than price, while for John Lewis they were flat at £4.8bn.
The retailer said it did not believe “it would be right” to pay a bonus for last year as it continued to reinvest to revive its fortunes after a challenging period, and after it increased pay by a total of £114mn earlier this year. The last time it paid a bonus, usually unveiled with great fanfare at its Oxford Street store, was for the year to January 2022.
The group also confirmed it would take a £40mn hit this year as a result of increases to employers’ national insurance contributions.
New chair Jason Tarry, who spent many years at Tesco and succeeded Dame Sharon White in September, said he was “determined to pay a bonus as soon as we can”, without sharing a timeline or targets, but the retailer would focus on base pay for now.
Interim finance chief Andy Mounsey said on Thursday that although redundancies were a “last resort” and were “regrettable”, the group would “probably need fewer roles” as it tries to become more efficient.
Most of these exits would be through “natural attrition”, he added. The group has gone from employing about 80,800 people in 2020 to about 69,000 at present.
Waitrose has made efforts to lower prices, launch new ranges and refurbish stores. At John Lewis, the group has added new fashion brands and invested in its beauty counters and modernising its systems. It plans to inject another £600mn in its “transformation” this year.
Tarry said: “We’re pleased with the hard won progress but we still feel as though there is a lot to come by focusing on our retail brands. We believe that we’ve got a good plan.”
He added that he would look to refresh the turnaround plan in a few years’ time.
Profit before tax and exceptional items, the group’s preferred metric, tripled from £42mn to £126mn.
John Lewis said it expected profits to increase further this year, although it acknowledged that the economic environment was “challenging for our customers and our business”.
Over the past five years, like other retailers, John Lewis has had to deal with the pandemic, high inflation, changing shopping habits and fierce competition. At the same time, it has been trying to return to profitability and improve sales amid criticism that White lacked the retail background to turn the business round.
The group said on Thursday that it had repaid a £300mn bond from cash reserves, resulting in the lowest borrowing since 2002. Its employee-owned structure means it has limited ability to raise money externally.
