The John Lewis Partnership has reintroduced its employee bonus for the first time in four years, giving staff a 2 per cent payout after a slight improvement in sales and underlying profits.
The decision marks a symbolic milestone for the employee-owned retailer, which has struggled in recent years with pandemic-related disruption, rising costs and intense competition across the UK retail sector.
The partnership, which operates 36 John Lewis department stores and around 320 Waitrose supermarkets, reported profits before tax and items of £134 million for the year to the end of January. This represents a modest improvement on £126m the previous year.
However, the legal results showed a different story. The group posted a statutory loss before tax of £21m, compared to a profit of £97m a year earlier, largely due to one-off costs including the write-off of aging technology systems.
Despite the accounting loss, the improvement in underlying performance was enough for management to restore the long-awaited bonus to its 70,000 employee-owners, known internally as partners.
Total group sales rose 5 per cent year-on-year to £13.4 billion, driven by stronger trading between the partnership’s two main retail brands.
Grocery division Waitrose delivered the strongest performance, with sales rising 7 per cent to £8.5bn, supported by a 3 per cent rise in volumes as the supermarket chain attracted more shoppers.
Meanwhile, department store business John Lewis posted sales growth of 3 percent to 4.9 billion pounds as the retailer sought to stabilize its position in a competitive market increasingly dominated by online platforms, fast fashion brands and discount rivals.
Despite the improving numbers, the company warned that several cost pressures continued to weigh on overall profitability.
The partnership said gains were “hampered” by £53m of headwinds, including the recent rise in employers’ national insurance contributions, the introduction of the extended producer responsibility levy and cautious consumer spending over the Christmas period.
For many employees, the reintroduction of the annual bonus after a long period without payment has symbolic meaning.
Traditionally, the John Lewis Partnership shares a portion of its profits with its employees via an annual bonus, which has historically been one of the retailer’s defining features.
However, bonuses were suspended during the pandemic after lockdown restrictions led to store closures and significantly reduced sales.
The freeze began in 2020 and marked the first suspension of the bonus since 1953.
Although the payment briefly returned to 3 percent in 2022, it was later canceled as the company struggled with losses and undertook a major restructuring program.
In previous decades the bonus had been much more generous. In the late 1980s, employees received payouts of up to 24 percent of annual salary, reflecting the retailer’s higher profitability at the time.
The newly announced 2 percent bonus therefore represents a cautious step towards restoring one of the partnership’s most distinctive traditions.
The decision comes under the leadership of Jason Tarry, the former boss of Tesco UK, who became chairman of the John Lewis Partnership in September 2024.
Tarry was tasked with reviving the historic retailer’s fortunes after years of declining profits, store closures and strategic missteps.
Under his leadership, the company has begun to focus on its core retail business, reversing previous efforts to diversify into areas such as real estate development.
One notable change was the decision to abandon the partnership’s controversial “build-to-rent” housing strategy, which involved building rental homes on Waitrose supermarket land.
The retailer said changing economic conditions, including higher interest rates and construction costs, meant the project no longer met its investment criteria.
Instead, the partnership is increasing its focus on retail, committing to £800 million of investment across all stores as part of a long-term plan to improve customer experiences, modernize stores and strengthen digital capabilities.
Tarry said early signs suggest the company’s new retail-first strategy is starting to deliver improvements.
“Our multi-year plan to invest in customers and our brands for the long term is working,” he said.
“We increased customer numbers and achieved record levels of satisfaction. We remain on track to make further progress this year.”
The partnership said its improved financial position, including increased liquidity and relatively low external borrowing, meant it could continue to invest in its transformation plans despite the uncertain economic outlook.
Management believes the strategy will enable the company to win back shoppers, increase brand loyalty and unlock growth opportunities at both Waitrose and John Lewis.
Despite the reinstatement of the bonus, executives expressed caution about the broader economic environment.
Tarry warned that the retail sector continued to be challenged by weak consumer confidence, rising operating costs and intense competition, describing market conditions as “subdued”.
The partnership said it remained “well positioned to navigate the difficult macroeconomic environment” but acknowledged further work was needed to return the business to sustainable profitability.
“We are confident of taking further steps forward in the coming year as we advance our multi-year transformation,” Tarry said.
The return of the John Lewis bonus has symbolic meaning for the entire retail sector.
The partnership’s employee ownership model has long been seen as an example of profit sharing and employee engagement in UK retail, with bonuses traditionally seen as a reward for collective performance.
After several difficult years marked by restructuring, store closures and increasing competition from online rivals, the reintroduction of the bonus is being seen internally as a sign that the retailer’s turnaround efforts may finally be gaining momentum.
While the payout is still modest compared to historical levels, the return of the bonus suggests the partnership is regaining stability after one of the most difficult periods in its 162-year history.
