John Lewis and Waitrose maintain focus on customer experience, despite falling profits

Cheryl Sanders
March 9, 2018

John Lewis Partnership PLC, the owner of John Lewis departmental store chain and Waitrose supermarkets, on Thursday reported a sharp drop in annual profits and warned on further earnings pressure from United Kingdom retail market volatility.

The bonus pot of £74m to be shared by 85,500 workers compares to an £89m pay-out the year before.

It follows a wretched few weeks for the United Kingdom retail industry.

The full-year report from the John Lewis Partnership comes amid a turbulent time for United Kingdom department store and grocery retailers. However, the Partnership "will see benefits this year from the many changes we implemented in 2017/18", and the faster delivery of key innovations.

The employee-owned retailer said its 85,500 staff, known as partners, would get a bonus of 5 percent, down from 6 percent previous year and at its lowest level since 1954.

This week New Look added to the high street's dismal start to 2018 with its announcement that it was looking to close almost 10% of its 593-strong United Kingdom store estate.

"We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let-up in competitive intensity", Sir Charlie said.

Sir Charlie said it was also the lowest since 1954 when the bonus was set at 4%, but stressed that the company would not shy away from taking that figure down to zero if necessary, in order to secure the "long term future of the Partnership". Operating profit before exceptional items was £254.2m up 4.5%.

However, operating profit fell 32.1% to £172 million, which the company attributes to its decision not to pass on all cost price inflation to its customers, as well as investments in its supermarkets.

In a statement issued today (8 March), Sir Charlie Mayfield, Chairman of John Lewis Partnership, said that 2017 had been a "challenging year" with subdued consumer demand and profits were down "mainly as a result of intensifying margin pressure in Waitrose".

Sales growth accelerated in the second half of the year, driven by better like-for-like volumes after the retailer lowered the prices of hundreds of "essential Waitrose" products.

A "particularly strong" performance in womenswear led The John Lewis Partnership to a 3.2% sales increase in its fashion division for the full year but it was not enough to offset a 77% drop in group earnings.

Rob Collins, managing director of Waitrose, said that some of the cost price increases were dramatic, with Scottish salmon up 25 per cent while the retail price rose up to 5 per cent.

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