John Lewis partners feel the pinch as profits collapse

Annual profits at the John Lewis Partnership have fallen by more than 45%, as challenging conditions on the high street hurt sales across its department stores.

The fall means the retailer has awarded its 83,900 workers, known as partners because they have a stake in the business, a bonus of just 3% of annual pay, down on last year’s 5% and the lowest for 66 years.

Total gross sales rose 1% to £11.7bn, while underlying profits before one-off items fell 45.4% to £160m. Pre-tax profits rose 9.2% to £117.4m after exceptional income of £2.1m.

At John Lewis & Partners, the department stores arm, sales were down 1.4% on a like-for-like basis. At Waitrose & Partners, its supermarket business, underlying sales rose 1.3%.

Charlie Mayfield, chairman, said it had been a “challenging year”.

He continued: “Operating profit recovered strongly at Waitrose, up 18%, mainly due to improved gross margins. However, it was down sharply – by 56% – in John Lewis & Partners, because of weaker home sales, gross margin pressure, higher IT costs and the property impact of new shops and lower profit on asset sales.”

John Lewis’s traditional pledge to be "never knowingly unsold" means it matches competitors’ prices. However, as conditions on the high street have tightened, it has been forced into heavy discounting as struggling rivals slash prices.

The retailer warned that current market conditions continued to be “challenging”.

“Near-term uncertainty, politically and in the economy, is having a major impact on consumer confidence, but we do not believe the market conditions are cyclical,” it said.

“The disruption we have seen on the high street, including business failures and renewed interest in mergers and acquisitions, are instead signs of an inevitable market adjustment which will required greater clarity on whether brands are competing on scale or difference.”

Mayfield added that he was “confident in our strategic direction and customer offer across both brands”.