John Lewis to Pay Lowest Employee Bonus in 67 Years After Profit Drops

(Bloomberg) --

John Lewis Partnership Plc's employees will get their lowest bonuses in 67 years in 2020, though they may be relieved to get anything following the U.K. retailer's three straight annual profit declines in a highly competitive market.

The parent company of John Lewis department stores and upmarket grocer Waitrose said it will pay a 2% bonus to its employee-owners as it reported a 23% profit drop for the latest year. Former Chairman Charlie Mayfield had warned in January that the payments might be eliminated this year. The 2% equates to about a week's pay.

Deciding whether to scrap the bonus was the first tough test for Sharon White, the former U.K. telecommunications regulator who succeeded Mayfield as chairman in February. She said on Thursday that the company is starting a strategic review of the business and will close three Waitrose stores.

As part of the review, John Lewis may scrap or modify a price-matching pledge in which it promises to be “never knowingly undersold,” White said. The department-store chain suffered from weak Christmas sales and has faced intense competition, particularly from online rival Amazon.com Inc.

“We've had fair value as part of our proposition for almost 100 years and fair value will continue to be part of our proposition going forward, whether that's in a more modernized form or not,” White said on a call.

Employee-Owners

John Lewis is owned by its more than 80,000 employees, known as “partners.” Once as high as 24% of a worker's salary, the annual profit-sharing bonuses fell to 3% last year, the lowest since the era of postwar rationing. White's review of the partnership will involve developing new services “outside retail,” she said in a statement. There may also be more shop closures.

The overall decline in earnings for the year ended Jan. 25 stemmed from the department-store arm, where operating profit before payment of the bonuses fell about 66% to 39.5 million pounds ($51 million). The partnership took a writedown of 123 million pounds on the value of its department stores.

Waitrose performed better in the year, with profit on the same basis rising 4.7% to 212.7 million pounds.

While the results were weaker than the company hoped, paying the bonus “recognizes the contribution made by partners working in the business today without creating risk for our future sustainability,” White said.

To contact the reporter on this story: Deirdre Hipwell in London at dhipwell@bloomberg.net

To contact the editor responsible for this story: Eric Pfanner at epfanner1@bloomberg.net

©2020 Bloomberg L.P.