John Lewis Partnership cuts staff bonus after profits fall
The John Lewis Partnership has reported that its full year pre-tax profits fell by 9% to £342.7 million in the 53 weeks to 31 January as its Waitrose chain suffered due to the supermarket price war. As a result, this years staff bonus has been cut to 11%.
The John Lewis department store increased its gross sales by 9.2% to £4.43 billion while growing its operating profit by 10.8% to £250.5 million. On a 52 week basis, shop sales were up 2.2% with like-for-like shop sales growth at 0.6%. Meanwhile, online sales at johnlewis.com climbed by 21.6% to £1.4 billion.
The retailer said it saw two key shifts in consumer behaviour in the year. These included click & collect overtaking home deliveries to account for 54% of online orders, and a new shape of peak trading with Black Friday becoming the busiest single sales day.
Looking at the department store’s three main categories, fashion sales rose by 8.3% boosted by strong growth in nursery, childrenswear and women's accessories as well as the own-brand Kin range.
Home sales increased by 7.2% as furniture and floor covering sales rose by 12.8% and 6.1% respectively.
Meanwhile, electrical and home technology sales grew by 7.9% despite a challenging market.
During the year, the retailer opened two convenience-driven shop formats at London's St Pancras station and Heathrow Terminal 2, and a new flexible format shop in York. In 2015 it will open a new regional flagship shop in Birmingham.
Looking at Waitrose, gross sales for the year increased by 6.5% to £6.51 billion with like-for-like sales up by 1.4%. However, operating profit was down by 23.4% to £237.4 million after being held back by a significantly higher level of investment in new branches, IT and the impact of one-off items. Profits were also impacted by the effects of the supermarket price war.
Online grocery gross sales were up 31.2% on a 52 week basis and the supermarket saw 5% growth in average order value.
Waitrose said its myWaitrose card was helping it to deepen its relationships with customers. The number of customers with a card now stands at 5.4 million and 68% of sales are to cardholders.
The supermarket opened 13 new core branches in the year, including eight acquired from the Co-operative, and another 20 convenience shops.
Commenting on the partnership’s performance John Lewis Partnership chairman Sir Charlie Mayfield said: “The partnership achieved a strong sales performance with increased market share in both Waitrose and John Lewis, and customer numbers up by 6% and 4% respectively.”
Mayfield said the 93,800 Partners will receive a bonus of 11%, equivalent to nearly six weeks' pay. This compares to 15% in the previous year. Due to new legislation which has put Employee Ownership on a similar footing to other forms of ownership, no Partner will pay tax on their bonus up to £3,600.
Giving information on the partnership’s performance in the first five weeks of the current year, Mayfield said gross sales rose by 1.9% against last year. At Waitrose gross sales up edged up 0.9% but fell by 2.8% on a like-for-like basis excluding petrol. Meanwhile, John Lewis gross sales increased by 3.7% and by 2.6% a like-for-like basis.
He added: “We expect the returns for the grocery sector to be materially lower for a period of time. Waitrose's value perception has improved significantly over the last few years and we will continue to defend that hard won position during this period of change in the grocery sector.
“For John Lewis, the outlook is robust. Our focus remains on positioning our brand to outperform and our investment in supply chain and systems, which has been growing for some years, will exceed that in new shops and refurbishment for the first time this year.”
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