Worker-owned retailer John Lewis is considering suspending this year’s staff bonus after the high street suffered its worst Christmas since the financial crisis.
It would be the first time since the 1953 that the bonus has been dropped. Last year, the bonus for partners was cut to 5%, down from 6% the previous year.
The news comes amid reports of a tough festive season for the retail sector, with Marks & Spencer and Debenhams both reporting sales falls.
In its Christmas trading statement for the seven weeks to 5 January, John Lewis Partnership, which also owns Waitrose, saw its gross sales rise by 1.4% but chairman Sir Charlie Mayfield warned that profits would still be hit due to heavy discounting by rivals and weak consumer demand.
He said: “We continue to expect full year total partnership profits to be substantially lower this year, driven by slower sales growth over the year and margin pressure in John Lewis & Partners along with higher costs, mainly as a result of our continued investment in our IT capability.
“The actions taken in recent years to prepare for the current pressures in retail mean that the Partnership has the financial strength and flexibility to pay a modest bonus this year, without impacting our ambitious investment programme. However, the Board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time.”
He added that the Partnership was making good progress on its updated business strategy, outlined last summer, which focuses on differentiation not scale to offer “increasingly unique and exclusive products and services”.
“We expect to deliver significant positive free cash flow this year, continuing to prioritise a very strong liquidity position and a reduction in our debt ratio over the medium to-long-term,” said Sir Charlie.