The John Lewis Partnership has confirmed that it will ditch the annual bonus for its 74,000 employees next year after it sank back into the red.
The employee-owned group posted a loss before exceptional items and tax of £78 million for the year to January 28, down from a profit of £181 million last year. Analysts had forecast a smaller loss of £50 million.
The partnership, which comprises John Lewis department stores and Waitrose supermarkets, blamed its performance on inflationary pressures, property write downs, supply chain challenges and a fire in one of its warehouses.
It said that the impact of inflation added £179 million to its costs in the year. Adding in exceptional costs, the biggest one being a write down in the value of Waitrose shops, the loss was £234 million.
Total sales were down 2 per cent to £12.25 billion as its shoppers also “felt the pain of inflation”; Waitrose sales were down 3 per cent to £7.31 billion and John Lewis sales were up 0.2 per cent to £4.94 billion.
The partnership said that the big online growth of the pandemic years had been “partly reversed” and admitted that its shoppers had shifted some of their grocery spending to the discounters.
Dame Sharon White, its chairman, said: “Inflation has had a big impact on the partnership and sent our costs soaring . . . it is also the case that we had some setbacks. Product supply challenges and a major fire in our Brinklow warehouse hit availability in Waitrose last summer.
“All in all, this has made for a tough set of results. I am sorry that the loss means we won’t be able to share a bonus this year or do as much as we would like on pay.”
The last time the bonus was axed entirely was in 2020, the first time since 1948, after the partnership posted a half-year loss following a battering from the pandemic. Last year the 2021-22 bonus was 3 per cent of an employee’s pay.
The company said it ended the year with a balance sheet of £1 billion, borrowings of £650 million and total net debt of £1.7 billion.
Yesterday it appointed Nish Kankiwala as its first chief executive as part of a shake-up of its management structure to help to “supercharge” its existing transformation plan. Kankiwala, a non-executive director at the retailer since April 2021, previously served as chief executive of Hovis and held senior roles at Burger King and PepsiCo.
The move came after Pippa Wicks, who was brought in by White as executive of John Lewis to revive the brand’s fortunes in 2020, left the business this month without giving a reason. She was succeeded by Naomi Simcock, its retail director, on an interim basis.
The business has been struggling for a number of years. Before the pandemic shutdown on the high street in 2020, cut-throat online competition and years of declining profits had put the partnership’s business model under threat.
It forced White to order a turnaround of the business in October 2020. Her five-year recovery plan, which aims to achieve annual profits of £400 million by 2025, has involved chopping down a 51-strong John Lewis department stores portfolio to 34. Other cost-cutting measures have included making thousands of staff redundant.
Last year Waitrose, the market share of which has slumped in the past two years, hired the American consultancy Bain & Company to help it to be more efficient and to reduce costs in order to invest elsewhere in the supermarkets, including a potential revamp of the 332-strong estate.
The partnership also has started to offload other parts of the wider business in a bid to boost its cash balance, including selling its Winter Hill Golf Club in Berkshire.