The John Lewis Partnership has warned that its annual staff bonus is under threat for the first time in living memory as it battles challenging trading conditions.
Around 83,000 staff are usually awarded the payout in March, but the retailer said on Thursday that it expects profits to be “substantially lower” this year amid slower sales growth, meaning the bonus could be axed.
Chairman Sir Charlie Mayfield said: “The board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time.”
It would be the first time since 1953 that staff have not received an annual bonus.
Sir Charlie added that the group is experiencing a higher level of uncertainty in the run up to Brexit.
“We are in a very unusual economic and political circumstances. It all comes down to a judgement on what is best for the Partnership.
“No one is getting rid of the bonus, bonuses go up and down. It’s affordable but the board needs to decide if it’s prudent.”
The bombshell announcement came alongside the firm’s Christmas trading update, which saw the department store chain book like-for-like sales growth of just 1% in the seven weeks to January 5.
While fashion, beauty and womenswear performed well, the firm said profit margins remain under pressure in what is an “intensely competitive pricing environment”.
Comparable sales at sister chain Waitrose rose by only 0.3%, despite a sharp reduction in the level of promotions.
Department store total sales were up 2.5% to £1.16 billion and Waitrose sales grew 0.2% to £1 billion.
Total sales across the Partnership were up 1.4% over Christmas to £2.2 billion.
The firm said that Black Friday contributed to the biggest sales week in John Lewis’ history.
However, Sir Charlie struck a downbeat note: “Two main factors are affecting the retail sector – oversupply of physical space and relatively weak consumer demand.
“We continue to expect full year total Partnership profits to be substantially lower this year, driven by slower sales growth over the year and margin pressure in John Lewis & Partners along with higher costs, mainly as a result of our continued investment in our IT capability.”
The retail sector is coming under intense pressure as consumer confidence takes a knock from Brexit worries and costs rocket.
At its half year trading update in September, The Partnership saw profits crashed 98.8% to £1.2 million.