Waitrose Sales Rise, But Costs See John Lewis Profits Fall 22%

John Lewis cuts staff bonus for the fifth year in a row as it reports a fall in profits

John Lewis Partnership PLC, the owner of John Lewis departmental store chain and Waitrose supermarkets, on Thursday reported a sharp drop in annual profits and warned on further earnings pressure from United Kingdom retail market volatility.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, said it had been a "challenging year".

'The number of partners will come down as a effect of that'. Pre-tax profits of £103.9m were 77% down on last time.

John Lewis Partnership, the owner of John Lewis department stores and the Waitrose supermarket chain, has reported a 77% fall in pre-tax profits to £104m after taking into account staff bonuses.

It is the fifth year in a row that John Lewis has cut the bonus.

It has cut the bonus for five years running now, down from 6% last year and as much as 17% in 2013.

He added that the company had chosen to cut the proportion of profits paid as partnership bonus in order to absorb the impact of tough trading "while continuing to invest in the future and in strengthening our balance sheet". As a result, it anticipates further pressure on profits but said it will see benefits this year from the "many changes" it implemented in 2017/18.

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Lower profit margins at the Waitrose driven by the fall in the value of the pound cut pretax profits by almost 22%.

Yesterday New Look announced it was closing stores after disappointing sales figures.

Looking ahead, the group said it expects trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity.

Waitrose gross sales were up 2.7% (up 2.4% like-for-like, excluding fuel) and John Lewis gross sales were down 2.8% (down 3.4% like-for-like).

Overall partnership results were hit by £73m in restructuring and redundancy costs plus a £39m write-down in the value of Waitrose branches.

The supermarket, a Top50 retailer in IRUK Top500 research, said lower margins in food, as it decided not to pass all cost increases to its shoppers, and investments in customer experience had hit profits over the year.

The John Lewis Partnership, which started 150 years ago with Waitrose joining in 1937, makes employees partners, awarding them a percentage of the company's income each year. But home sales fell by 0.8%, with lower demand for upholstery and fitted flooring and furniture.