Partnership feeling the pinch
John Lewis profits hit as Waitrose caught in price war
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.