John Lewis scraps staff bonus after profits hit by lockdown store closures

The John Lewis Partnership will not give staff members a bonus for the first time since 1953 after this year’s lockdown knocked the company’s performance.

The group said it plunged to a £635 million pre-tax loss for the six months to 25 July after higher costs offset a one per cent rise in sales. Once exceptional items were taken into account, including a £470 million write-down in the value of its stores, the retailer’s loss in those six months stood at £55 million.

In a letter to partners today, Chairwoman, Sharon White, said the announcement about there being no staff bonus “will come as a blow”. In April, she warned of these potential circumstances.

The last time that the chain decided not to pay a bonus to its staff was in the aftermath of World War Two.

Ms White (pictured) said the decision “in no way detracts from the commitment and dedication” that staff have shown, and “outside of exceptional circumstances, we would now expect to begin paying a bonus again once our profits exceed £150 million”.

Sales across the John Lewis Partnership increased by 1.1 per cent to £5.56 billion for the half-year, but the company saw higher sales of “less profitable lines such as laptops and loo rolls”.

However, it also benefited from Government subsidies and expects the business rates holiday for the current year to offset pandemic-related costs by around £50 million.

At John Lewis stores, online sales surged by 73 per cent in the six months to 25 July; Ms White said this helped to offset the impact of shop closures. Online sales now account for more than 60 per cent of overall sales for the department store chain, up from 40 per cent before COVID-19 hit, she reported.

The group added that a shift towards increased home working had affected people’s purchases, with increased sales of TVs and tablets.

Ms White added that sales momentum is starting to build in reopened stores, with sales down around 30 per cent on last year, ahead of expectations.

“Stores in retail parks are down by around 15 per cent and are doing better than city centres, especially London, which is down around 40 per cent,” she said.

“We can be bolder and more innovative than conventional companies, even in these challenging times,” Ms White continued. “The pandemic has brought forward changes in consumer shopping habits which might have taken five years into five months. Both brands [John Lewis and Waitrose] entered the crisis with strong and established online businesses and, powered by Partners, have been key to underpinning our first half performance.”

Following increased online business, in July the group said it would close eight John Lewis stores, in a move which put 1,300 jobs at risk.

Looking ahead, Ms White said that the outlook for the second half is “clearly uncertain”, given the wider coronavirus crisis.

She added: “Christmas trade is also particularly important to profits in John Lewis.”

In fact, the retailer announced that its Christmas shop in John Lewis has opened early this year.

Ms White concluded: “We believe the most likely outcome will be a small loss or a small profit for the year.”

And she referred to making £100 million of savings at head office “as early as possible this financial year and next”.