John Lewis says brand won’t suffer ‘malaise’ after bonus pay hits 63-year low

Even though it has cut its annual bonus scheme for the fourth year in a row, the John Lewis Partnership says it doesn’t expect any negative blow-back for its brand perception.

Photo: Yui Mok

Despite pre-tax profits rising 21.2% to £370.4m in 2016, the John Lewis Partnership has cut bonus pay for its 86,700 staff for the fourth year running.

Employees will receive a bonus that constitutes to just 6% of its annual profits for 2016. This means staff will share a bonus pot of £89.4 million – down from the 10% (£145m) rate last year.

The justification for the cut is that the John Lewis board is preparing for a “volatile” 2017, where both inflation and uncertainties around interest rates could destabilise the business if action isn’t taken. It also claims its investment in infrastructure – particularly in omnichannel, with two thirds of John Lewis and Waitrose customers now shopping via more than one channel – means a cut in bonus pay was inevitable.

Speaking at a press briefing today (9 March), John Lewis Partnership chairman Sir Charlie Mayfield told Marketing Week he didn’t expect its wholesome brand image – something largely built on the positive way it rewards staff as shareholders – to be impacted by what equates to the lowest staff bonus since 1954, when it stood at just 4%.

He explained: “I don’t think this is going to lead into some malaise for our brand at all. Although there will be some disappointment among staff, the prevailing realisation will be one of realism.

“This isn’t about slowing down but a sign of our determination to speed things up. What you hear with the bonus cut is a sign that our plan to invest in the things customers love – so customer service, product and in-store experiences – is healthy. We are determined now to work hard to build the bonus rate back up.”

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Last October, John Lewis appointed former brand director Paula Nickolds to the role of managing director following the departure of Andy Street. And at today’s briefing, she spoke of the “positive fame” its Christmas ad created.

However, Nickolds, answering a question from Marketing Week on whether this fame now needs to stretch over the whole year and not just the festive quarter, hit back: “Our brand is about more than just advertising. It is about offering great events and experiences all year round. That will become a priority moving forwards.”

Overall sales for the John Lewis Partnership rose 3.2% in 2016, with both John Lewis and Waitrose increasing their market share. However, Waitrose saw like-for-like sales – which strip out the impact of store openings and closures – fall 0.2% despite trading improving in the second half of the year.

In order to make both its John Lewis and Waitrose branches more desirable, Mayfield said there was an opportunity to add more services such as opticians and Kuoni-branded travel agents. Waitrose managing director Rob Collins, meanwhile, said the group was embarking on a three-year programme of regeneration, which will mean all of its stores will be revamped.

He said Waitrose, in particular, has a “massive opportunity” to profit from food service and the introduction of more cafes, which feature tailored features such as sushi counters.