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Owner of John Lewis and Waitrose reports 77% drop in annual profits
09 March 2018, 05:28 | Randall Craig
John Lewis' partnership bonus was 10 per cent in 2015
In a statement issued today (8 March), Sir Charlie Mayfield, Chairman of John Lewis Partnership, said that 2017 had been a "challenging year" with subdued consumer demand and profits were down "mainly as a result of intensifying margin pressure in Waitrose".
Waitrose achieved gross sales of £6.75 billion a year ago, up 1.8% compared to 2016, with like-for-like sales, excluding fuel, increasing by 0.9%.
The John Lewis Partnership is set to axe more jobs this year after the department store chain was forced to slash its annual bonus following a 77 per cent drop in profits.
In the first five weeks of the company's 2018 financial year, Waitrose sales were up by 2.7% and John Lewis sales were down 2.8%. Group profits before partnership bonus, tax and exceptional items dropped 21.9 per cent to £289.2 million.
The retailer also warned of further pressure on profits in the year ahead, the Telegraph reported, as well as "volatile" trading conditions, "continuing economic uncertainty" and intense competition.
It marks the fifth straight year of bonus cuts, having gone down from six per cent last year and as much as 17 per cent in 2013.
According to the company, after resetting its gross margins in response to the weaker sterling, the "resulting lower rate of gross margin was equivalent to more than 80 per cent of the shortfall in operating profit before exceptional items".
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said it had been a "challenging year". As a result, it anticipates further pressure on profits but said it will see benefits this year from the "many changes" it implemented in 2017/18. Waitrose recorded 2.4% growth in like-for-like sales, excluding fuel, and John Lewis same store sales were down 3.4%.
"This was why we chose to reduce the proportion of profits paid as Partnership Bonus previous year so as to absorb these impacts while continuing to invest in the future and in strengthening our balance sheet". But home sales fell by 0.8%, with lower demand for upholstery and fitted flooring and furniture.
"We did both and I am pleased to say that despite lower profits, strong cash flow has enabled us to reduce our total net debts".
Waitrose saw like-for-like sales grow by 0.9% but at the expense of a 42% dive in operating profits, as higher costs were not passed on in prices.
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