The owner of John Lewis and Waitrose has returned to annual profit but will not pay its workers a bonus for the second year in a row.
The John Lewis Partnership (JLP) said it made a £56m pre-tax profit in the year to 27 January, compared with a £234m loss in the previous year.
The staff-owned retailer, which employs about 74,000 people – known as “partners” – said that after careful consideration it would not pay its staff an annual bonus for the third time in four years. It said that instead, “at this point in our transformation”, a sustainable business was best served by investing in its retail businesses and the base pay. of its staff.
JLP plans to open its first new Waitrose stores in a decade and refurbish 80 more supermarkets while investing in technology to improve the John Lewis website and customer service for shoppers in stores.
The company said it was “entering a year of significant investment”, with £542m planned to be spent – up 70% on a year before, adding that it was “on track” to hit its target of making £400m in profit by 2028. The £542m is in addition to £116m being spent on increasing pay to a minimum of £11.55 an hour – although that remains behind key players including Sainsbury’s and Marks & Spencer.
Part of the investment will also go towards “simplifying the way we work”, said JLP, suggesting job cuts may be on the cards this year. The group is thought to be considering cutting up to 11,000 jobs over the next five years.
Sharon White, the JLP chair, said there was no target for job reduction but that action to make the business simpler and more flexible meant there would be “less need for some roles over the coming years”.
She added: “We have made significant progress in the last year to return the business to profitability and delivered results that allow us to increase investment in our retail businesses; we expect profits to grow further this year.
“This shows our plan is working, while we know there’s much more to do … This year we will unashamedly focus on investing back into our retail businesses for our customers.”
White said a target of making 40% of JLP profits from non-retail business by 2030 had been ditched because of changes to the economic climate. “That target was set in 2020 when inflation was 2% and interest rates zero. We all know the world of the last few years,” she said.
Last year, John Lewis ploughed 10% of its overall investment into non-retail including financial services and building homes to rent. It plans to invest 5% this year, with White arguing a “complimentary family of businesses are important to the partnership’s long term profitability”.
She said the return to profit came after making £88m of savings, mainly by better matching staff hours to need in Waitrose stores and also by cutting energy use as well as more automation at John Lewis’s distribution network. That helped offset an £112m increase in costs caused by inflation, particularly in relation to pay and energy bills.
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The company said its plans for the next four years would be self-funded through cashflow. Rumoured plans for the sale of a stake in the business have been ditched.
Sales, excluding VAT, rose by 2% to £10.8bn. At Waitrose supermarkets, sales rose by 5% but the volume of items sold was down 1.5% as shoppers faced a cost of living crisis.
However, sales at the John Lewis department stores fell by 4% to £4.8bn. The company said it had recorded weak sales in homeware and tech, while those in fashion, including beauty products, were up. Beauty sales were up by 4%. Strong fashion sellers included men’s tailoring (up 48%) and lingerie (up 8%).
Peter Ruis, the new boss of the group’s department stores who will set out further details of his revamp plans later this year, said he was confident the chain would return to sales growth this year.
James Bailey, the chief executive of Waitrose, said the business would be investing more in keeping prices down as well as improving the look of its stores including fresh food counters and in-store services.
