Credit: Duncan Hull/Flickr

Supermarket price war drags down John Lewis bonus

Waitrose's falling profits mean John Lewis partners will get just 11% extra this year.

by Jack Torrance
Last Updated: 20 Oct 2015

Waitrose has been outperforming most of its supermarket rivals lately but it seems even the posh end of grocery retail has not been immune to the ongoing food price war. In the 53 weeks to January 31 its operating profits were down a staggering 23.4% to £237m, despite a 6.5% uptick in sales.

John Lewis Partnership chairman Sir Charlie Mayfield said the supermarket's profits were held back by a competitive marketplace, one-off costs and higher levels of investment. It's opened 13 new supermarkets and 20 Little Waitrose convenience stores in the past year, which would account for much of the squeeze, but the firm admitted price deflation had hit its profits by around £26m.

John Lewis itself had a stronger year, with sales up 9.2% to £4.4bn and operating profits up 10.8% to £250.5m. Its online performance was particularly strong, with sales up 21.6% to £1.4bn, and the company said it coped well with the demands of a frenzied Black Friday.

'The investments made over many years in systems, logistics and IT infrastructure, combined to enable John Lewis to make more deliveries via Click & Collect than to customers' homes for the first time,' Mayfield said. 'John Lewis was able to fulfil over 6.4 million orders over the year with 98.7% of parcels in store the following day.'

Read more: John Lewis MD Andy Street: 'Our moral compass is always in play'

That wasn't enough to counter the woes of Waitrose though. The partnership's pre-tax profits, excluding exceptional items, dipped 9% to £342.7m. The really bad news for John Lewis's staff, though, is the impact on their legendary annual bonus.

Back in 2008 this was set at 20%, but this year it will slump to 11%, lower than any time during the recession and down from last year's 15%. They will however benefit from from a new tax break, which exempts bonuses at employee-owned businesses up to £3,600, so that will dampen the blow a little bit.

Mayfield's got mixed feelings about the future. He described John Lewis's outlook as 'robust' but said he expects 'the returns for the grocery sector to be materially lower for a period of time.' Waitrose will need to up its game if it wants to maintain its reputation as a great place to work.

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