Sharp decline in profit levels expected at John Lewis

John Lewis staff are expected to see their annual bonus slashed next week when the department store chain unveils a sharp drop in full year profits.

John Lewis is the flagship store in the Victoria Gate shopping centre
John Lewis is the flagship store in the Victoria Gate shopping centre

The partnership, which includes upmarket supermarket Waitrose, warned in January that it might have to axe the renowned payout for the first time since 1953 as it battles challenging trading conditions.

Even if the bonus is reduced rather than axed on Thursday, it will represent the sixth year in a row that the firm’s 83,000 workers have had to stomach a cut to the benefit, first introduced in 1920.

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Independent retail analyst Nick Bubb said: “They could still afford to pay a three per cent bonus - which would cost circa £45 million - but they have softened the staff up for nothing.”

Outgoing chairman Sir Charlie Mayfield said in January that the board will need to consider carefully whether “payment of a bonus is prudent in the light of business and economic prospects”.

Not only is the partnership coming under intense pressure as consumer confidence takes a knock from Brexit worries and higher costs, Waitrose will also next year lose its near-two decade long contract with Ocado.

It comes as the online grocer instead gets into bed with Marks & Spencer.

“We are in a very unusual economic and political circumstances.

“It all comes down to a judgment on what is best for the partnership.

“No one is getting rid of the bonus, bonuses go up and down. It’s affordable but the board needs to decide if it’s prudent,” Sir Charlie said at the time.

The bonus announcement will come alongside what is set to be poor set of full year financial figures for the bellwether retailer, which operates four stores in Yorkshire in Sheffield, York and Leeds.

Numbers crunched by Mr Bubb show that the partnership could be set to suffer a 40 per cent plunge in annual pre-tax profits to £172 million.

When accounting for exceptional items, that figure could be dragged lower still.

Mr Bubb is pencilling in a 40 per cent fall in operating profits at John Lewis to around £140 million.

Waitrose is tipped to be a bright spot, with operating profits set to grow from £172 million to just under £200 million.