The John Lewis Partnership has warned that it expects its staff bonus to be “significantly lower” than last year in the face of a challenging market outlook.
The company, which includes supermarket Waitrose, said that despite posting strong Christmas trading figures and pencilling in a rise in profits for the full year, a difficult year ahead and the “importance of investment for the future” mean that the bonus will probably be cut.
It said in a trading statement: “We have decided to comment on bonus implications at this stage because the partnership’s strong Christmas trading, and the likelihood of higher reported profits, risk overshadowing the importance the board is placing on the challenging market outlook, our determination to maintain a strong balance sheet and our commitment to accelerating our strategy.
“The precise level of the bonus will be decided as usual in March, but, in view of these factors, it is likely to be significantly lower than last year.”
John Lewis department stores reported a 2.7 per cent rise in like-for-like sales over the Christmas trading period, while Waitrose saw a 2.8 per cent increase in the six weeks to December 31.
Gross sales at John Lewis rose 4.9 per cent to £998.1m while Waitrose was up 4.8 per cent to £914.9m.
Last year, staff shared a bonus pool of £145m, which amounted to an average payout of roughly £1,585 for each of its 91,500 staff.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, warned that profits are under pressure and that the retailer is bracing for a period of significant change.
“We traded strongly over Christmas with sales up nearly 5 per cent and both Waitrose and John Lewis grew market share.
“We sustained a strong sales performance right through to Christmas and enabled a great start post Christmas, including clearance.
“However, although we expect to report profits up on last year, trading profit is under pressure.
“This reflects the greater changes taking place across the retail sector. We expect those to quicken, especially in the next 12 months as the effects of weaker sterling feed through.
“We will now accelerate aspects of our strategy. This will involve a period of significant change, investment and innovation to ensure the Partnership’s success.”
The comments highlight the challenges facing newly appointed John Lewis managing director Paula Nickolds.
Ms Nickolds became the department store chain’s first female managing director when she was appointed in October.
In July, her predecessor, Andy Street, who has swapped retail for a career in politics, said the plunge in sterling could become a problem for the company and, while the firm is “fully hedged” against currency fluctuations for 2016-17, it could become an issue in the next financial year.
John Lewis opened a flagship store in Victoria Gate in Leeds last autumn. It also has stores in York and Sheffield.
A spokesman said: “John Lewis does not give out individual branch sales.
“With regards to investment, Leeds and York are new shops and therefore would not be the focus of investment, and any other investment John Lewis will talk about as the year progresses.”
John Lewis said it needed to invest heavily in its online business this year after 40 per cent of total sales came from the internet over Christmas.
Britons have embraced online shopping in recent years, with new collaborations enabling shoppers to buy online and pick up goods at a network of third-party outlets such as petrol stations, railway stations and post offices.
John Lewis has been among those leading the way in online sales in recent years.
However, it said that, although it had enjoyed a strong Christmas performance, it now needed to rebuild to prepare the business for even faster change.