International

John Lewis Partnership axes staff bonus as it slumps to £635m loss

John Lewis Partnership has confirmed it will not pay a staff bonus next year after it posted a half-year loss of £635m.

It is the first time in more than 60 years that workers at the employee-owned business will not receive a pay-out, which was last axed after in 1948 in the aftermath of the Second World War and remained at zero until 1953.

The partnership has like other retailers been battered by the pandemic – axing more than a thousand jobs as it closes some department stores for good and sharply writing down the value of shops as the shift to online demand accelerates.

Its John Lewis department store chain suffered a 10% fall in sales for the six months to July – in contrast to the partnership’s supermarket business Waitrose, where sales rose by nearly 10%.

Dame Sharon White, chair of JLP, said its worst-case scenario remained a 5% fall in sales at Waitrose and 35% at John Lewis for the full year with the most likely outcome a “small loss or a small profit”.

Partners had already been warned in April that they were unlikely to see a bonus in 2021 and Dame Sharon said the board had now confirmed “that there will not be a bonus next year given our profit outlook”.

She added: “I know this will come as a blow to partners who have worked so hard this year.

“The decision in no way detracts from the commitment and dedication that you have shown.

“The partnership found itself in a similar position in 1948 when the bonus was halted following the Second World War.

“We came through then to be even stronger than before and we will do so again.”

Dame Sharon said that “outside of exceptional circumstances” JLP would expect to start paying a bonus again once profits exceed £150m and debt falls and that once profits top £300m it would expect the bonus to be at least 10% of salary.

JLP has been trimming its once-generous staff bonuses – which stood at 17% in 2013 – in recent years, with a cut this year to 2%.

But until now it has avoided axing the pay-out completely.

The partnership said that overall, when including both John Lewis and Waitrose, sales were up by 1%, but shoppers spent more on “less profitable lines such as laptops and loo rolls”.

A driver packs away boxes after delivering Waitrose groceries to a house in Hackney, London, Britain, as the spread of the coronavirus disease (COVID-19) continues, March 24, 2020
Waitrose is now delivering 170,000 online orders a week

There was also a £50m hit from “pandemic-related costs like safety equipment”.

John Lewis saw a big impact from home working, with more TVs and tablets and fewer trousers and trainers sold.

There was also a divide between retail park stores, where sales were down 15%, and city centres, especially London – where sales fell 40%.

JLP reported an underlying loss of £55m – better than had been previously expected and roughly in line with the same time last year.

But it also reported big one-off costs including a £470m writedown against the accounting value of its department store network, due to the big shift in demand from bricks-and-mortar retail to online.

Dame Sharon said that before the pandemic, store sales were thought to account for £6 for every £10 spent online but this had now fallen to £3.

The large writedown to account for this pulled the business to an overall £635m loss, compared to a profit of £192m last year.

Results from both parts of the business illustrated the shift away from bricks-and-mortar, with John Lewis internet sales up 73% while Waitrose.com saw a “strong pick-up in demand” after the end of the supermarket’s tie-up with Ocado.

Waitrose is now delivering around 170,000 weekly online orders, up from 60,000 before the pandemic, and with capacity set to expand to 250,000 over coming months, JLP said.

The results come after the company said in July it planned to close eight John Lewis stores permanently with the loss of 1,300 jobs.

This week, it said four Waitrose shops would shut, with the loss of 124 jobs.