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Published on March 9th, 2017 | by The GC Team

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John Lewis cuts staff bonuses to strengthen balance sheet

John Lewis Partnership today said it will cut staff bonuses to 6%, down from 10% last year, in order to retain more of the company’s annual profits to strengthen its balance sheet.

Sir Charlie Mayfield, Chairman of the Partnership, said the move allows the business to maintain the level of investment in what it expects to be “an increasingly uncertain market.”

The 6% bonus payout is the lowest since 1954.

The Partnership Bonus was announced as the retailer released its results for the 52 weeks ended 28th January 2017. Profits before exceptionals rose 21.2% to £370.4 million on gross sales of £11.37 billion, up 3.2% on last year.

Mayfield said John Lewis continued to outperform the market against a backdrop of “a changing and competitive retail landscape.” Gross sales were up 4.0% to £4.74 billion, with strong like-for-like sales growth of 2.7%.

Operating profit before exceptional items was slightly down, at £243.2 million, 2.8% lower than last year.

Electricals & Home Technology sales were up 6.8%.  The retailer opened Smart Home areas in three stores, leading to a 16.7% increase for Audio and Smart Home. New products such as the Dyson Supersonic hairdryer and an exclusive high street launch of the Oculus Rift helped to drive sales.

In its outlook for 2017/18, Mayfield said that trading pressures will continue as a result of the wider changes taking place in retail. The two major influences being 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,” he added.

For the first five weeks of this year, Partnership gross sales are up 0.5% on last year.  Gross sales at John Lewis have risen 0.5%, but fallen 1.4% on a like-for-like basis.

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