Employee Engagement

The John Lewis Partnership has warned that it expects its renowned staff bonus to be “significantly lower” than last year in the face of a challenging market outlook.

The company, which includes supermarket Waitrose, said that despite posting strong Christmas trading figures and pencilling in a rise in profits for the full year, a difficult year ahead and the “importance of investment for the future” mean that the bonus will probably be cut.

It said in a trading statement: “We have decided to comment on bonus implications at this stage because the partnership’s strong Christmas trading, and the likelihood of higher reported profits, risk overshadowing the importance the board is placing on the challenging market outlook, our determination to maintain a strong balance sheet and our commitment to accelerating our strategy.

“The precise level of the bonus will be decided as usual in March, but, in view of these factors, it is likely to be significantly lower than last year.”

John Lewis department stores reported a 2.7% rise in like-for-like sales over the Christmas trading period, while Waitrose saw a 2.8% increase in the six weeks to December 31.

Gross sales at John Lewis rose 4.9% to £998.1 million while Waitrose was up 4.8% to £914.9 million.

Last year, staff shared a bonus pool of £145 million, which amounted to an average payout of roughly £1,585 for each of its 91,500 staff.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, warned that profits are under pressure and that the retailer is bracing for a period of significant change.

“We traded strongly over Christmas with sales up nearly 5% and both Waitrose and John Lewis grew market share.

“We sustained a strong sales performance right through to Christmas and enabled a great start post Christmas including clearance.

“However, although we expect to report profits up on last year, trading profit is under pressure.

“This reflects the greater changes taking place across the retail sector. We expect those to quicken, especially in the next 12 months as the effects of weaker sterling feed through.

“We will now accelerate aspects of our strategy. This will involve a period of significant change, investment and innovation to ensure the Partnership’s success.”

The comments lay bare the challenge ahead for newly appointed John Lewis managing director Paula Nickolds.

Ms Nickolds became the department store chain’s first female managing director when she was appointed in October.

In July, her predecessor, Andy Street, who has swapped retail for politics, said the plunge in sterling could become a problem for the company and, while the firm is “fully hedged” against currency fluctuations for 2016-17, it could become an issue in the next financial year.

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