John Lewis Cuts Employee Bonus to Lowest Since 1953
(Bloomberg) -- U.K. retailer John Lewis Partnership Plc cut employee-owners’ annual bonus to the lowest level in more than half a century, underlining the depths of the crisis in the country’s shopping districts.
The operator of department-store chain John Lewis and grocer Waitrose said it cut the bonus to reduce debt, maintain investment and retain cash as it wrestles with uncertainty over the economy and consumer confidence. The company said Thursday that profit before bonus payments fell 45 percent in the latest year.
The bonus of 3 percent is down from 5 percent a year earlier and is the lowest since 1953, when the company made no payout as Britain was stuck in a postwar economic slump. Now the retail industry is going through a new downturn as shoppers buy more via Amazon.com Inc. and keep a tighter grip on their wallets in the run-up to Brexit. Rival department-store chain Debenhams Plc issued its fourth profit warning in 14 months earlier this week, and retailers like stationer Paperchase are seeking rent reductions from landlords.
The profit decline “shows the vulnerability of British retailers as we hurtle towards Brexit,” Kantar Consulting analyst Anusha Couttigane said in a note.
As stores shut down, employment in the U.K. retail sector has fallen for more than three years, according to the British Retail Consortium. The U.K.’s biggest retailer, Tesco Plc, announced plans to cut as many as 9,000 jobs as German discounters Aldi and Lidl expand.
Even the reduced payment provided a measure of relief to John Lewis employees, after the company had warned in January that it might not be able to pay a bonus at all. As recently as 2014, the payout stood at five times this year’s level.
“When the bonus was announced there was a cheer louder than when there was a 15 percent bonus,” Chairman Charlie Mayfield said at a press briefing. The company’s roughly 80,000 partners will share a lump sum of 44.7 million pounds ($59 million), down from 74 million pounds a year ago.
Profit in the department-store arm, known for its understated housewares, fell 56 percent. Earnings at Waitrose, a favorite of London’s upmarket shoppers, bounced back 18 percent.
Sales of homewares are under particular pressure from e-commerce, while the company is investing more in its online grocery platform. John Lewis has agreed to end a food-delivery partnership with Ocado Group Plc as that company enters a new arrangement with Marks & Spencer Group Plc.
©2019 Bloomberg L.P.