For the hundreds of staff who gathered at the John Lewis store in Oxford Street in Central London yesterday morning, it was a moment of sheer joy, the whoops of delight genuine.
The employee-owned business had just announced that its staff would share a a bonus pot of almost £200 million.
For the partnership’s 76,500 staff, the bonus is equal to 18 per cent of their annual salary, which to the average member means an extra £2,700. The higher-than-expected £194.5 million payout is equal to more than nine weeks’ pay and is far above the £151 million bonus paid out for 2009.
But behind the celebrations, the management of group that also takes in the Waitrose supermarket chain was taking a distinctly cautious view of the year ahead. Trading has become more difficult and consumers are worried about government spending cuts and higher taxes.
Charlie Mayfield, the partnership’s chairman, said: “We’re clearly at a time when the consumer is feeling cautious. It feels like we’re at a time when the country is waiting for its exam results,” refering to shoppers’ uncertainty about the Government’s austerity measures and how they will be affected.
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He added that while the period after Christmas was often subdued, there was “just more uncertainty around right now than usually at this time of year”.
Mr Mayfield, who is set for a sixfigure bonus, hoped that conditions would improve after Easter, when consumers should have a better understanding of the Government’s plans. Yet he warned that even then it would not be “plain sailing” but merely a return to slow growth in consumer expenditure.
John Lewis reported a 20 per cent rise in pre-tax profits to £367 million for the year to January 29 on sales up 10.6 per cent to £8.2 billion. At Waitrose, sales increased 10 per cent to almost £5 billion, with like-for-like sales growth hitting 4 per cent, while John Lewis sales rose even faster at 12 per cent to £3.2 billion, or 10 per cent on a same-store basis.
The company attributed its outperformance of both the high street and the other big supermarkets to the investment made in its business even through the recession.
At Waitrose, the average number of weekly shoppers increased by about 300,000, it enjoyed success with its brand price match scheme and opened 20 new stores.
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The chain also spent more on advertising, with campaigns featuring the celebrity chefs Delia Smith and Heston Blumenthal.
Meanwhile, John Lewis opened three new homeware stores and extended its “never knowingly undersold” policy to a thriving online store, which will soon expand to cover Europe and the United States.
Overall, the business created a net 4,100 new jobs in the year, with a further 4,300 expected in 2011.
However, weekly sales figures since the partnership’s financial year-end already suggest that shoppers have started spending more carefully.
Sales over the five weeks since the year-end were up 6.5 per cent year-on-year, although on a like-for-like basis Waitrose sales were 5.1 per cent higher and John Lewis revenue only up 0.5 per cent.
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Andy Street, managing director of John Lewis, said: “We know it is going to be a much more challenging year, we can see that from the numbers, but we’re investing for growth.”
Despite the cautious outlook, Mr Street said that it was important to reward staff for their performance last year. “We’re not highly paid bankers, so it means a lot,” he said.
“This is a different type of bonus to others, it is a collective reward and not about individuals. The reaction [by staff to the bonus announcement] was so elated, it was anything but austerity Britain.”
The Waitrose worker
Jenny Wayne made the short trip from Waitrose on Marylebone High Street, where she works on the meat and fish counter, to the Oxford Street John Lewis store to witness the bonus announcement. “It’s excellent,” she said. “It’s been tough so I wasn’t sure how much we’d get. I was hoping for 15 per cent.” Mrs Wayne, who has worked at Waitrose for five years, says she likes her job but that the bonus is a welcome extra. “It’s my daughter’s 21st coming up so I’ll spend some of the money on that and hopefully go on holiday.”
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The store manager
Simon Fowler, the managing director of the Oxford Street store, had the job of geeing up the crowd before the bonus announcement. “I enjoy moments like this as it really distinguishes us from others on the high street,” he said. “The result is a great reward in a year when the economy has been less than reliable.” Mr Fowler says that it is not hard to motivate staff to focus on the job in hand after the excitement of the announcement. “They are buzzing, it takes a while to come down from the high.”
The delivery driver
When Mick Murphy, a John Lewis delivery driver for 26 years, was given the job of raising the large placard detailing the bonus figure, he did not know what number it had on it, but from the reaction of his colleagues he knew it must have been OK. “I’m delighted. I had no idea how much we were getting,” he said. “I’d like to go away this summer and treat the wife and kids. We don’t take the bonus for granted and it is greatly appreciated,” he added.