John Lewis set to reduce staff bonus payout again

Reduction reflects a fall in profits at the group, particularly in its food retail arm

John Lewis on Oxford Street,  London. Retail analyst Nick Bubb is forecasting an 8 per cent fall in pre-exceptional profits to around £350 million, reflecting a 20 per cent slump in operating profits at Waitrose.
John Lewis on Oxford Street, London. Retail analyst Nick Bubb is forecasting an 8 per cent fall in pre-exceptional profits to around £350 million, reflecting a 20 per cent slump in operating profits at Waitrose.

The payouts that give bonuses a good name will be revealed Thursday morning, when the John Lewis Partnership announces its annual results.

To the usual cheers from employees gathered at the group’s flagship Oxford Street store, chief executive Andy Street will reveal the proportion of profits that will be paid out in bonuses this year.

The retailer, which is effectively owned by its employees, first started paying bonuses to staff – or partners as they are known – in 1920. They were set then at 15 per cent of salary and received by everyone from the cashiers to the chairman.

At their peak, bonuses reached 24 per cent, paid out in 1979, 1987 and 1988. The lowest-ever payout was 4 per cent in 1954, but there were also a number of years, during the war and various recessions, that payments were suspended altogether.

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Things will be better than that this year but there may be some disappointment among the group’s 90,000 or so employees, as the payment is likely to be lower for the second year in a row.

Last year they were awarded 15 per cent of their salaries in bonuses – the equivalent of about two months pay – a reduction from the 17 per cent payout the previous year.

This year, the bonus is expected to come down further, to between 10 per cent and 14 per cent, according to analysts.

Profit fall

That reflects a fall in profits at the group, particularly in its food retail arm. Its upmarket supermarkets chain,

Waitrose

, has consistently outperformed the market but is suffering from the fierce food price war.

Group costs are also being driven higher by the increasing push online.

Retail analyst Nick Bubb is forecasting an 8 per cent fall in pre-exceptional profits to around £350 million, reflecting a 20 per cent slump in operating profits at Waitrose.

Bubb makes the point that nearly all John Lewis’s sales growth came from online, which brings with it extra fulfilment costs, particularly at peak times such as the frenzy of buying experienced by the group, along with other retailers, on Black Friday last autumn.

Traditional reputation

The growth of the online operation is also making it harder for the group to live up to its traditional reputation for good customer service. Complaints among its loyal army of middle class customers have been growing in recent months, with tales of botched deliveries and washing machines and other goods dumped in gardens.

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Fiona Walsh is business editor of theguardian.com