The treasured annual John Lewis Partnership bonus has been cut to its lowest level in 12 years after the supermarket price war caught up with Waitrose.
Although partners still thronged the escalators of the John Lewis department store on Oxford Street for the announcement and the choir sang hits from their Christmas adverts, they left counting the cost of a bonus which fell from 15 per cent of salary last year to 11 per cent this year.
Sir Charlie Mayfield, the partnership’s chairman, attempted to put the cut in the context of its 150 year history, saying the bonus has been as high as 24 per cent and as a low as 8 per cent, and that the £156.2 million bonus pool was the equivalent of almost six weeks’ pay.
The damage was done by Waitrose where profits fell 23.4 per cent to £237.4 million in the year to January 31, as the upmarket grocer was hit by falling prices, forced lower by the fierce battle across the industry for market share, and investments in IT, new stores and technology designed to keep up with the transformation in shopping habits.
Waitrose managed to grow annual like-for-like sales by 1.4 per cent at a time when the major grocers have been losing trade. However, in the first five weeks of its new financial year, sales were down 2.8 per cent.
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Mark Price, managing director of Waitrose, said he was “undoubtedly” facing the biggest challenge of his 34 years at the partnership, but expected like-for-like sales to return to growth this year, “all other things being equal”.
He said the future for Waitrose was uncertain amid “dramatic” change in food retailing as customers shop online, at convenience stores and eat out more. This has been compounded by food deflation, he added.
“I can do no better than to quote Churchill who said: ‘This is not the end, it’s not even the beginning of the end but it is perhaps the end of the beginning’”.
The outlook at Waitrose’s sister, John Lewis, was brighter.
Operating profit rose 10.8 per cent to £250.5 million. The department store enjoyed its best performance in homewares since the “crash” and fashion sales were up 8.3 per cent, or 32 per cent online.
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Across the group as a whole, profit before bonus, tax and exceptional items was down 9 per cent to £342.7 million.
David Alexander, consultant at Conlumino, a retail consultancy, said falling profits at Waitrose “ can only be sustained in the short term and John Lewis will be hoping that the struggles in grocery will soon abate or its best laid plans for the long term could be subject to a re-evaluation”.