John Lewis has hinted that the suspension of staff bonuses could continue as other investment priorities take precedence.
The retailing group, which also owns the upmarket Waitrose chain of supermarkets, reiterated its priorities as it warned that it recovery plans will be pushed back by two years because of "inflationary pressures". This was despite a 41% cut in pre-tax losses for the first half of the year.
John Lewis - which is owned by its 74,000 employees, who are referred to as partners - said in March of this year that it will not pay a staff bonus for only the second time since the scheme began in 1953. That came after a worse-than-expected £230 million annual loss, again only the second in its history.
"Our priorities for investment remain to modernise the business, improve customer service and do more for partner pay, where we can," the group said. "These demands are significant and take precedence over the partnership bonus."
READ MORE: John Lewis: Are the revival plans running out of runway?
The group posted a pre-tax loss of £57.3m for the 26 weeks to July 29, an improvement on the £99.2m loss for the corresponding period a year earlier. Revenues rose to £5.07 billion, up from £4.95bn previously.
Rising costs and larger investment requirements mean John Lewis' recovery ambitions will not be achieved until 2028. Launched in 2020, the "Partnership Plan" originally envisaged returning to a £400m profit by 2025/26 financial year.
Partnership chair Sharon White survived a vote of confidence in May among employee-owners after ruling out the possibility of altering the group's ownership structure. There had been speculation this could be an option as part of a bid to raise up to £2bn in external investment.
“The partnership is a unique model that has been tested and come through stronger many times in our 100 year history," she said.
"While change is never easy - and there is a long road ahead - there are reasons for optimism. Performance is improving. More customers are shopping with us. Trust in the brands and support for the partnership model remain high.”
Despite challenging economic conditions, John Lewis said shoppers continued to spend money on themselves in the first half of the year with sales of clothing, beauty products and dine-in”meals all rising. However, consumers were wary of splashing out on “big ticket” items such as technology products or sofas, with sales falling in these areas.
The company said the economic outlook remained uncertain but it expected to see an improvement in its full-year financial results.
In the first half of the financial year, operating profit at the John Lewis department store chain fell from £295m to £277m. Sales were down by 2%.
READ MORE: Shake-up at the top as John Lewis is set to post another annual loss
Operating profit at Waitrose improved to £504.4m from nearly £432m, despite IT problems earlier in the year which affected product availability. Sales increased by 4%.
The results are the first to be released since the appointment earlier this year of the partnership's first chief executive, former Hovis and Burger King executive Nish Kankiwala.
“Our transformation to modernise our business is well under way, and I want to thank our partners for their efforts to give customers great service, quality and value when they shop with us in store or online," Mr Kankiwala sais. "There are no brands better placed than Waitrose and John Lewis to provide customers with what they need right now - to help them feel good and eat well.”
Victoria Scholas, head of investment at Interactive Investor, noted that profits at John Lewis have been struggling "for a number of years" amid high costs linked to its store estate and the rise in cheaper e-commerce rivals like Amazon. Meanwhile, Waitrose is swimming against the tide of increasingly price-sensitive consumers.
“Focus will be on the all-important festive period when John Lewis typically enjoys a seasonal boost," she said. "Dame Sharon White has a daunting task at hand to revive John Lewis’s fortunes at a challenging time for retail more broadly, laid bare by the recent collapse of Wilko.”
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