John Lewis scraps bonus as it reports £635m loss

John Lewis Partnership scrapped its staff bonus and guided staff not to expect a renewed payout soon as the department store group swung to a £635m annual loss.

Chairman Sharon White said the decision not to pay a bonus for the first time since 1953 was because of the negative profit outlook for the employee-owned retailer. The bonus has been an important part of its 80,000 partners' pay and the group's culture though its value had been whittled away from more than 20% of salary to 2%.

White, who earns almost £1m a year, said she expected the group to start paying a bonus again when profit exceeds £150m and debt falls to less than four times cash flow in two or three years. When profits exceed £300m and debt is less than three times cash flow employees can expect a bonus of at least 10%, she said.

"I know this will come as a blow to partners who have worked so hard this year," White said. "The partnership found itself in a similar position in 1948 when the bonus was halted following the Second World War. We came through then to be even stronger than before and we will do so again."

The company's loss before bonuses, tax and exceptional items for the year to 25 July widened to £55m from £52m a year earlier as sales increased 1% to £5.57bn. White said though sales rose customers spent more on less profitable items such as laptops and toilet roll.

John Lewis, which also owns Waitrose, took £580m of exceptional charges compared with £244m of gains the year before, sending it to a £635m pretax loss. The main cost was £471m for the reduced value of its stores as shoppers move online.

White, who joined in February from the communications regulator, said the company's worst-case scenario was for sales to fall 5% at Waitrose this year and 35% at John Lewis and that the most likely outcome was a small profit or loss. She said last year's £55m adjusted loss was better than expected and that trading so far this year was encouraging.

The 156-year-old group is cutting jobs, closing stores and expanding its online business to adjust to rapid changes in consumer behaviour caused by the Covid-19 crisis.