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9 hours ago
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Profits are set to double at the owner of John Lewis and Waitrose, but it is likely to be a third barren year for the staff bonus as the retail group targets hourly pay and revamping its stores instead.
The staff-owned John Lewis Partnership, which runs 36 department stores and the Waitrose supermarket chain, has not paid a bonus to workers in three of the past four years, after diving to a loss during the pandemic when it was forced to close stores during government lockdowns.
After a painful turnaround plan since then, under which 16 department stores and at least 20 Waitrose outlets were closed and thousands of head office staff jobs cut, the company is expected to reveal that profits will surge to £120m in the year to end of January from just £56m last year, according to retail analyst Nick Bubb.
It had been hoped that the new chair, Jason Tarry, who will present his first set of results on Thursday since stepping in six months ago after a long career at Tesco, would celebrate the positive with a cash reward for workers. However, John Lewis is expected to focus on upgrading its stores and improving weekly pay for its staff, having announced a 7.4% pay rise last week to a minimum of £12.40 an hour.
Sales before VAT are expected to rise to just over £11bn, slightly up on last year, according to Bubb. It has endured a difficult few years, as shoppers sought to save money during the cost of living crisis, while it faced much stronger competition, especially from Marks & Spencer.
Bubb said the rise in profits would indicate “the turnaround story is still on track”, despite the company not quite hitting an internal target to top £130m, or the £150m the group had previously indicated it must hit before bonus payments could be restarted. “I would expect more significant progress in profits over the next year, despite the economy,” he said.
Industry insiders say John Lewis department stores saw a real bounce from the return of the “Never Knowingly Undersold” marketing campaign over Christmas and by offering a plethora of fresh new beauty and fashion brands.
A tough autumn for fashion and homewares was offset by strong technology and beauty sales. However, overall weaker-than-hoped-for trading and the change in product mix towards lower-margin technology is expected to dampen profits.
Waitrose is now holding market share after returning to sales growth two years ago, having resolved IT issues that hit availability. It has also won some shoppers back by cutting prices and stepping up innovation.
That comes after “a year of significant investment” in 2024, with £542m spent across the group – up 70% on the year before. The group opened its first new Waitrose outlet in six years in November, in Hampton Hill, south-west London, and has upgraded beauty halls in some department stores – including the main Oxford Street flagship, which now also has a Waterstones bookstore and is putting in a Jamie Oliver cookery school.
The company is still aiming to make £400m in profit by 2028 but has ditched a plan for 40% of profits to come from non-retail, such as build-to-rent flats and financial services, by 2030, as that is seen to detract from its core business.
Bubb said John Lewis had “plenty there” in terms of profit to fund the staff payment, but was likely to prioritise everyday pay, especially with cost inflation already baked in through next month’s increases in the legal minimum wage and national insurance contributions.
He said there was a risk the lack of bonus could be “very demoralising, particularly for Waitrose staff”, but he said workers “would probably prefer to have higher monthly pay to help pay the mortgage than a small year-end bonus. In an ideal world they’d have both ... but this is not an ideal world.”
