John Lewis profits jump but no staff bonus again

British retailer John Lewis has announced that its employees will not receive bonuses for the third consecutive year, despite a significant increase in annual profits. The employee-owned retail partnership, which also includes the Waitrose supermarket chain, reported a 73% increase in profits last year, reaching £97 million. This decision highlights the complex balance between rewarding employees and investing in the company's future growth.

Despite the profit increase, the John Lewis Partnership has chosen to invest funds in business development and employee salary increases rather than reinstate employee bonuses. Chairman Jason Tarry stated that he is "determined to pay a bonus as soon as possible," but the specific timing "will depend on the conditions at the time." Company sources added that John Lewis has no specific threshold or criteria for restoring bonuses. This strategic allocation of resources reflects a long-term vision for sustainable growth and employee well-being.

The John Lewis Partnership employs approximately 69,000 people. Earlier this month, the company announced a 7.4% pay raise for store employees this year. However, this marks the fourth time in the past five years that John Lewis has not issued bonuses. Previously, the company suspended bonuses from 2020 due to the impact of store closures during the COVID-19 pandemic, marking the first time since 1953. The focus on base pay increases aims to provide more consistent financial stability for employees.

Bloomberg Intelligence analyst Charles Allen stated that the lack of bonuses was "long anticipated." He also added: "I think we have to factor in the large wage increases coming through in line with minimum wage growth. Also, although partners don’t see it, there’s been a big increase in employer national insurance." John Lewis was one of the signatories to a letter to the government last year, which pointed out that the increase in employer national insurance contributions from April would make job losses on the high street "inevitable." These external economic pressures significantly influence the company's financial decisions.

Mr. Tarry said on Thursday that there would be job losses in the coming year, but that these would be managed as much as possible through attrition, by not filling positions after employees leave, and through redeployment of existing staff, rather than through redundancies. He also added that the increased employer national insurance costs from April would cost the business £40 million in the coming year. In the year to the end of January, Waitrose sales grew 4.4% to £8 billion, and the chain sold more of its own-brand products. GlobalData retail analyst Eleanor Simpson-Gould said that while Waitrose’s sales growth lagged behind M&S over the crucial Christmas period, it was ahead of Tesco and Sainsbury’s. This highlights the competitive landscape and the need for strategic adjustments.

She added that the company has doubled its investment in lowering the prices of certain items. "With food inflation on the rise again, Waitrose must be agile in keeping essential prices low and offering consumers opportunities to trade up," Ms Simpson-Gould said. Sales at John Lewis department stores were flat year-on-year. John Lewis said that while it expects the economic environment to be "challenging" for both customers and businesses in the coming year, it remains confident that it can improve profits. After a difficult few years, with job cuts and the closure of several stores, John Lewis has been trying to win back customers through a recovery plan. In March 2024, the company reported its first annual profit after years of losses, but also said it would not be paying employee bonuses. Last September, the company reinstated its "Never Knowingly Undersold" price promise after abandoning it two years previously. These initiatives are aimed at enhancing customer value and competitiveness.

Before the promise was initially scrapped, staff still used pencils, spreadsheets, and trips to other stores to track competitors’ prices. The company said it now uses artificial intelligence to track prices in physical stores and online competitors, and to look at menu trends to help it decide its own menus. This technological upgrade streamlines operations and improves efficiency in price monitoring and menu planning.