John Lewis Partnership has scrapped its staff bonus for the first time since the aftermath of the Second World War after slumping deep into the red.
The staff-owned retailer posted a loss of £635mln in the six months to 25 July after impairment charges of £580mln related to store closures, job cuts and a head office restructuring.
JLP had already announced it is not reopening eight department stores, while grocery arm Waitrose said yesterday it would shut three outlets and sell one to Tesco.
There was an underlying loss of £55mln as lockdown disruption hit the department stores especially hard though revenues rose overall 1.1% to £5.57bn and were helped by good online sales at John Lewis and buoyant grocery demand at Waitrose.
Due to the impact of lockdowns, department store revenue fell 8.3% (£133m) to £1.8bn, but in a worse case scenario John Lewis & Partners might see full-year sales drop 35% in the second half, though more likely, it said, will be a small loss or a small profit for the year.
Chair, Dame Sharon White, acknowledged that the bonus cut would be a blow to staff who she said had worked so hard this year.
“Outside of exceptional circumstances, we would now expect to begin paying a bonus again once our profits exceed £150m and our debt ratio falls below 4 times.
“Once our profits rise above £300m and a debt ratio below 3 times, we would expect to pay a bonus of at least 10%.”
Susannah Streeter, Senior Investment and Markets Analyst, at Hargreaves Lansdown added: ‘’Losing the bonus will be a huge blow to workers who have been at the retail front line of the pandemic - at tills, in warehouses and on delivery trucks.
"The fact that it’s the first time since 1953 that John Lewis will not pay out a proportion of profits to staff highlights the once in a generation challenge the retail sector is facing.
The pandemic has brought about a revolutionary shift in shopping habits as consumers switch to online stores and opt for click and collect services from the high street.
"For retail giants like John Lewis who have dominated the sector with mega footprints across shopping centres and retail parks, pivoting quickly to keep up has been a huge challenge."