Reduced bonus at John Lewis reflects UK retail crisis

UK retailer John Lewis Partnership cut its employee-owners’ annual bonuses to the lowest level in more than half a century, underlining the depths of the crisis in the country’s retail business.

The operator of department store chain, John Lewis, and grocer, Waitrose, said it cut the bonus to reduce debt, maintain investment, and retain cash, as it wrestles with uncertainty over the economy and consumer confidence.

Profit, before bonus payments, fell 45% in the latest year. The bonus of 3% is down from 5% a year earlier and is the lowest since 1953, when the company made no payout, as Britain was stuck in a postwar economic slump. Now, the retail industry is going through a new downturn, as shoppers buy more through Amazon and keep a tighter grip on their wallets in the run-up to Brexit.

Earlier this week, rival department-store chain Debenhams issued its fourth profit warning in 14 months and retailers like stationer Paperchase are seeking rent reductions from landlords. The profit decline “shows the vulnerability of British retailers, as we hurtle towards Brexit,” Kantar Consulting analyst, Anusha Couttigane, said in a research note.

As stores shut down, employment in the UK retail sector has fallen for more than three years, according to the British Retail Consortium.

The UK’s biggest retailer, Tesco, announced plans to cut as many as 9,000 jobs, as German discounters, Aldi and Lidl, expand. Even the reduced payment provided a measure of relief to John Lewis employees, after the company had warned, in January, that it might not be able to pay a bonus at all. “When the bonus was announced, there was a cheer louder than when there was a 15% bonus,” chairman, Charlie Mayfield, said at a press briefing. The company’s roughly 80,000 partners will share a lump sum of £44.7m, down from £74m a year ago.

Profit in the department store arm fell 56%. Earnings at Waitrose bounced back 18%.

Meanwhile, fashion retailer Quiz issued its third profit warning in six months, causing a renewed plunge in the shares, which have now fallen 92% percent from their July peak.

- Bloomberg