The owner of John Lewis and Waitrose has reported a 77% fall in annual profits and cut bonuses given to staff for the fifth year running.
Earnings were hit by a squeeze on profit margins at Waitrose thanks to the Brexit-linked weakness of the pound – pushing up costs at the same time as the supermarket was trying to keep a lid on prices.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, pointed to subdued consumer demand during a challenging year which also saw a costly shake-up including 1,440 redundancies.
He said further pressure on profits was expected in coming months amid continuing economic uncertainty and fierce competition.
Sir Charlie added that sales at its department stores had been significantly impacted by last week’s snow.
Pre-tax profit for the year to 27 January fell to £103.9m while the employee-owned partnership’s bonus scheme was cut to 5% of salary – down from 6% in 2016/17 and 10% the year before that.
The bonus pot of £74m to be shared by 85,500 workers compares to an £89m pay-out the year before.
Waitrose saw like-for-like sales grow by 0.9% but at the expense of a 42% dive in operating profits, as higher costs were not passed on in prices.
John Lewis saw 0.4% sales growth and a slight uptick in profits.
Overall partnership results were hit by £73m in restructuring and redundancy costs plus a £39m write-down in the value of Waitrose branches.
The bottom-line figure compares to the prior year when it was boosted by a big one-off accounting gain linked to pension benefits.
Sir Charlie said: As we anticipated, 2017 was a challenging year.
Consumer demand was subdued and we made significant changes to operations across the partnership which affected many partners.
The chairman said that for the first five weeks of the new financial year, Waitrose like-for-like sales were up 2.4% but John Lewis saw a 3.4% fall amid the cold snap.
He added: We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity.
We therefore anticipate further pressure on profits.
He added that the company had chosen to cut the proportion of profits paid as partnership bonus in order to absorb the impact of tough trading while continuing to invest in the future and in strengthening our balance sheet.
(c) Sky News 2018: John Lewis and Waitrose owner reports 77% profit plunge