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Partnership feeling the pinch

John Lewis profits hit as Waitrose caught in price war

John LewisSupermarket chain Waitrose suffered a slump in profits as it was forced to slash prices to compete with discount rivals Aldi and Lidl.

A determined search for bargains even among the wealthier grocery shoppers saw the chain’s operating profits dive by 23.4%, dragging down profits at its owner,  John Lewis Partnership, by 9%.

It meant John Lewis has been forced to to cut its staff bonus payout for a second straight year.

The profits collapse overshadowed the fact that Waitrose has been winning customers, up 6% over the year and against 4% for the department stores.

Gross sales for the year at Waitrose grew by 6.5% to £6.51 billion (4.6% on a 52 week basis), with like-for-like sales up 1.4%. Operating profit came in at £237.4 million.

On average, there were 400,000 more customer transactions a week compared to last year and market share grew to 5.4%.

But margins have been severely squeezed by the price war. “We expect the returns for the grocery sector to be materially lower for a period of time,” the company said.

Sales at the John Lewis department stores rose 9.2% to £4.43bn, producing an operating profit of £250.5m, up 10.8% which chairman Sir Charlie Mayfield attributed to investment in such areas as online shopping.

Group operating profit fell 6.1% to £442.3m and profit before tax and exceptional items fell 9% to £342.7m.

Its 93,800 staff, known as partners, will receive a bonus of 11% of salary, equal to nearly six weeks pay, against 15% last year. But for the first time, and because of new legislation that puts employee ownership on a similar footing to other forms of ownership, no partner will pay tax on their bonus up to £3,600.

John Lewis was able to fulfil over 6.4m orders over the year with 98.7% of parcels in store the following day.

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