The John Lewis Partnership has warned that its annual staff bonus is under threat for the first time in living memory as it battles challenging trading conditions.
Around 85,000 staff are usually awarded the payout in March, but the retailer said today that it expects profits to be “substantially lower” this year amid slower sales growth.
Chairman Sir Charlie Mayfield said: “The board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time.”
The bombshell announcement came alongside the firm’s Christmas trading update, which saw the department store chain book like-for-like sales growth of just 1% in the seven weeks to January 5.
While fashion, beauty and womenswear performed well, the firm said profit margins remain under pressure in what is an “intensely competitive pricing environment”.
Comparable sales at sister chain Waitrose rose by only 0.3%, despite a sharp reduction in the level of promotions.
“Two main factors are affecting the retail sector - oversupply of physical space and relatively weak consumer demand.
“We continue to expect full year total Partnership profits to be substantially lower this year, driven by slower sales growth over the year and margin pressure in John Lewis & Partners along with higher costs, mainly as a result of our continued investment in our IT capability,” Sir Charlie added.
The retail sector is coming under intense pressure as consumer confidence takes a knock from Brexit worries and costs rocket.