The owner of John Lewis and Waitrose has reported a 77% fall in annual profits and cut the annual bonus given to staff.
Earnings were hit by a squeeze on profit margins at Waitrose thanks to the Brexit-linked weakness of the pound – which pushed up costs at the same time as the supermarket was trying to keep a lid on prices.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, pointed to “subdued” consumer demand during a challenging year which also saw a costly shake-up which saw 1,440 redundancies over the course of the year.
He said further pressure on profits was expected in coming months amid continuing economic uncertainty and fierce competition.
Sir Charlie added that sales at John Lewis had been “significantly impacted” by last week’s snow.
Pre-tax profit for the year to 27 January fell to £103.9m while the employee-owned partnership’s bonus scheme fell to 5% of salary – down from 6% in 2016/17 and 10% the year before that.
It was the fifth year in a row that the rate has fallen.
The bonus pot of £74m to be shared by 85,500 workers compares to an £89m pay-out the year before.
Waitrose saw like-for-like sales grow by 0.9% but at the expense of a 42% dive in operating profits while department store John Lewis saw 0.4% sales growth and a slight uptick in profits.
Overall partnership profits were hit by £73m in restructuring and redundancy costs plus a £39m write-down in the value of Waitrose branches.
The bottom-line figure compares to results a year ago when it was boosted by a big one-off accounting gain linked to pension benefits.
Sir Charlie said: “As we anticipated 2017 was a challenging year.
“Consumer demand was subdued and we made significant changes to operations across the partnership which affected many partners.”
The chairman said that for the first five weeks of the new financial year, Waitrose like-for-like sales were up 2.4% but John Lewis saw a 3.4% fall amid the cold snap.
He added: “We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity.
“We therefore anticipate further pressure on profits.”
He added that the company had chosen to cut the proportion of profits paid as partnership bonus in order to absorb the impact of tough trading “while continuing to invest in the future and in strengthening our balance sheet”.