John Lewis Profits Rise but Staff Bonus Still Absent

John Lewis Profits Soar, But Bonus Remains Elusive 

John Lewis Partnership (JLP) reported a 73% surge in profits, reaching £97 million for the year ending 25 January 2025, a marked improvement from the previous year's £56 million. Despite its significant financial gains, employees—known as partners—will go without a bonus for the third consecutive year, as the company channels resources into business improvements and workforce compensation rather than immediate profit distribution. 

Much of this profit growth was driven by Waitrose, the partnership's grocery arm, which outperformed expectations. Meanwhile, John Lewis department stores reinforced their competitive stance by reviving their "Never Knowingly Undersold" price-matching pledge, a policy they had abandoned in 2022, aiming to regain consumer trust and loyalty. 

Prioritising Investment Over Bonuses 

JLP Chairman Jason Tarry expressed a commitment to reinstating bonuses. He emphasized that the timing depends on the partnership's financial health. Internal sources suggest no specific criteria exist for bonus reactivation. The partnership employs around 69,000 people. A recent pay rise of 7.4% for shop floor staff marked the fourth bonus suspension in five years. The initial suspension occurred in 2020, marking the first time since the mid-20th century that John Lewis did not award a bonus. COVID-related store closures significantly impacted the company's performance. 

Analyst Perspective on Bonus Suspension 

Bloomberg analyst Charles Allen observed lowered expectations regarding employee bonuses. He pointed towards substantial salary increases implemented to remain competitive with minimum wage adjustments. Allen highlighted the increased National Insurance payments for employers, noting that this business expense remains invisible to employees. Last year, John Lewis, alongside other businesses, petitioned the government, cautioning that the planned April increase in National Insurance contributions could lead to unavoidable layoffs across high streets, posing significant challenges for retailers and employees alike. 

Redundancies Remain a Possibility 

Jason Tarry announced the likelihood of staff reductions in the near future. He aims to manage these adjustments through unfilled vacancies and internal transfers, hoping to minimize formal dismissals. Tarry explained that the increased National Insurance contributions will cost the partnership an estimated £40m annually. The partnership is committed to finding ways to absorb this cost without impacting staff or customers. Further details will likely emerge in the coming months. 

Waitrose Outperforms Competitors 

Waitrose revenue increased by 4.4% to £8bn in the year ending January 2025. This revenue increase reflects the chain’s success in promoting store-brand merchandise. Eleanor Simpson-Gould, a retail analyst at GlobalData, noted that Waitrose's holiday season sales growth lagged behind Marks & Spencer, highlighting the intensifying competition within the premium grocery market during this crucial shopping period. However, Waitrose outperformed both Tesco and Sainsbury’s. Simpson-Gould highlighted Waitrose doubling its price reduction spending on essentials and emphasized the need for strategies to mitigate escalating food costs. She suggested maintaining low prices for staple products while encouraging premium upgrades where possible. 

Image Credit - BBC

John Lewis Department Store Sales Remain Flat 

John Lewis department store sales remained static compared to the previous year. Despite anticipated challenges for consumers and businesses in the retail sector, John Lewis aims to increase its earnings in the near future. The firm continues efforts to rebuild customer loyalty after a difficult period, which included previous job cuts and store closures. The company returned to profitability in March 2024 after an extended downturn. However, this return to profitability did not trigger a bonus distribution to the workforce. 

"Never Knowingly Undersold" Returns 

After a two-year hiatus from its price-matching guarantee, John Lewis has reinstated its "Never Knowingly Undersold" policy, signaling a renewed commitment to competitive pricing and customer value. This strategic move aims to strengthen consumer trust and reinforce the brand’s promise of affordability alongside quality. Previously, staff used paper records and physical store visits to competitors to verify pricing. Now, the company utilizes AI and algorithms to compare competitor prices both in-store and online. This technological shift streamlines the price-matching process. It allows for quicker and more efficient price comparisons. This reinforces the retailer's commitment to offering competitive prices. This decision signals a strategic attempt to regain customer trust and re-engage shoppers who may have drifted away after the policy's initial removal. By reinstating the price-matching guarantee, the partnership aims to reinforce its commitment to competitive pricing and consumer confidence. The application of artificial intelligence extends to menu analysis, enabling strategic menu planning. This helps optimise offerings to customer preferences and current trends. This investment in technology signals an interest in using data for more intelligent business practices. 

Navigating a Changing Landscape 

JLP faces a complex challenge: balancing its commitment to its employee-owned structure with the need for modernization in a competitive retail market. The decision to prioritize investments in technology, store upgrades, and higher base pay for its 69,000 employees over the traditional staff bonus reflects this balancing act. Despite the sharp rise in profits, the continued absence of employee bonuses for the third consecutive year highlights the strategic trade-offs the partnership must make as it prioritizes long-term stability and sustained growth. 

The return of the "Never Knowingly Undersold" pledge, abandoned in 2022 and now powered by AI, exemplifies JLP's blend of tradition and innovation. This commitment to competitive pricing, coupled with AI-driven menu analysis at Waitrose, suggests a forward-looking approach to data utilization and customer engagement. 

Waitrose: A Bright Spot in a Challenging Market 

Waitrose has emerged as a driving force within the partnership, boasting increased revenue and outperforming major competitors like Tesco and Sainsbury's. Its success can be attributed to several factors, including the promotion of store-brand merchandise and strategic price reductions on essential items. However, maintaining this momentum requires ongoing adaptation to rising food costs and competition from rivals like Marks & Spencer, particularly during peak seasons. 

John Lewis Department Stores: A Path to Revitalization 

While Waitrose flourishes, the John Lewis department stores face a different set of challenges. Sales have remained stagnant, highlighting the need for a renewed focus on attracting and retaining customers. The partnership's efforts to rebuild customer loyalty after a period of job cuts and store closures are crucial for long-term success. Initiatives such as the reintroduction of the "Never Knowingly Undersold" policy and investments in visual merchandising and online experience enhancement are designed to address these challenges. 

Looking ahead, JLP's strategy hinges on several key elements: 

Investment in the Core Business: The partnership's substantial investments in technology upgrades, store refurbishments, and supply chain modernization are designed to create a more efficient and customer-centric operation. This focus on internal improvements is aimed at bolstering long-term profitability and competitiveness. 

Employee Well-being: While the bonus remains elusive, the significant increase in base pay for employees reflects a commitment to their well-being. This approach may help to mitigate the impact of rising living costs and maintain employee morale during a period of transformation. 

Strategic Growth: Waitrose's expansion plans, including new store openings and refurbishments, signal an ambitious growth strategy. Likewise, John Lewis department stores are prioritizing enhancing their product selection and elevating customer experience as key strategies to stimulate sales growth and brand loyalty. This strategy is designed to reinforce their market presence while remaining responsive to shifting consumer preferences. By continuously evolving, the partnership can stay competitive and meet the changing demands of its customer base. 

Navigating Economic Headwinds: 

The partnership acknowledges the challenging macroeconomic environment and the impact of lower consumer confidence. Successfully navigating these headwinds will require agility, innovation, and a continued focus on value and quality. 

The John Lewis Partnership stands at a critical juncture. The choices made today will determine its success in the years to come. By embracing innovation while upholding its core values, the partnership aims to navigate the evolving retail landscape and secure a sustainable future for its employees and customers. The road ahead may be challenging, but the partnership's commitment to long-term investment and employee well-being provides a foundation for continued growth and resilience. Note that this information is current as of April 2, 2025, and the situation may evolve over time. 

A Deeper Dive into the Partnership's Strategy 

The John Lewis Partnership's strategic vision rests on several pillars designed to ensure its long-term sustainability and success. These core elements shape the partnership's responses to current market dynamics and its plans for the future. 

Investing in the Core Business:  

Modernization is a key focus for the partnership. Significant investments are being made in technology upgrades, store renovations, and improvements to its supply chain. These initiatives aim to create a more streamlined, efficient, and customer-focused operation, ultimately enhancing long-term profitability and competitiveness. The modernization initiatives extend to the implementation of AI and algorithms for price matching, showcasing a blend of traditional retail values with cutting-edge technology. 

Prioritizing Employee Well-being:  

Despite the ongoing bonus suspension, the partnership has demonstrated its commitment to employee well-being through substantial increases in base pay. This commitment also takes the form of fostering an inclusive environment where every employee has a voice and the opportunity to contribute to the shared success. This financial commitment aims to mitigate the impact of rising living costs and maintain morale during this transitional period. This investment in employees underscores the partnership's belief in its people as its most valuable asset. 

Strategic Growth Initiatives:  

Growth remains a priority for the partnership. Waitrose is pursuing an active expansion strategy, including new store openings and existing store refurbishments. Concurrently, John Lewis department stores are focused on revitalizing their product offerings and enhancing the customer experience. These efforts demonstrate the partnership's commitment to remaining competitive in the market by providing an exceptional customer journey. Waitrose's dedication to quality and affordability is especially reflected in its emphasis on in-house brands and its adaptability to shifting food prices. By strategically managing costs and product offerings, the company reinforces its commitment to providing value while maintaining high standards. 

Navigating Economic Uncertainty:  

The partnership acknowledges the current economic headwinds and the impact of reduced consumer confidence. To counteract these effects, the partnership emphasizes the importance of implementing strategies to mitigate escalating food costs. This approach focuses on keeping essential products affordable while strategically incorporating premium upgrades where viable. By balancing cost-efficiency with high-quality offerings, the partnership aims to meet diverse consumer expectations and sustain a competitive edge. Navigating these economic challenges with adaptability, innovation, and a steadfast commitment to quality will be essential for ensuring the partnership's resilience in the face of financial uncertainties. 

Tradition and Innovation:  

A unique challenge for the John Lewis Partnership is balancing its long-standing tradition of employee ownership with the need for modernization. This careful equilibrium is evident in the partnership's commitment to offering competitive pricing while preserving its long-standing tradition of recognizing and rewarding employee contributions. Striking this balance is essential for fostering both customer loyalty and workforce motivation, ensuring sustained success. The choice to prioritize investments over bonuses underscores this challenge. The reintroduction of the "Never Knowingly Undersold" policy, powered by AI, highlights the partnership's commitment to blending tradition with innovation to meet evolving consumer expectations. 

Looking Ahead: 

The John Lewis Partnership recognizes that it is navigating a pivotal moment in its history. Decisions made in the present will shape its trajectory in the coming years. By embracing innovation while remaining true to its core values, the partnership aims to navigate the shifting retail landscape and build a sustainable future for its employees, also known as partners, and customers. The journey may be complex, but the partnership's dedication to long-term investment and employee well-being lays the foundation for continued growth and resilience in a challenging market. This sustained progress and adaptability are crucial for maintaining customer engagement and loyalty. This commitment to innovation, combined with a focus on revitalizing the John Lewis department stores, positions the partnership for long-term success. 

The Human Element: Partners and Customers 

The success of John Lewis Partnership is deeply tied to both its strategic initiatives and the strength of its relationships with its employee-partners and customers. These two stakeholder groups are integral to shaping the company's direction, ensuring its long-term stability, and maintaining its reputation as a trusted, customer-centric brand. Nurturing these relationships is paramount to the partnership's long-term health and prosperity. 

Image Credit - Fashion Network

Partners at the Heart of the Business:  

The unique employee ownership model distinguishes the John Lewis Partnership. Every employee is a co-owner, a partner in the business. This structure fosters a sense of shared purpose and responsibility, contributing to a culture of pride and commitment. While the recent lack of a bonus has undoubtedly been a challenge, the partnership's commitment to increasing base pay demonstrates a focus on partner well-being. Open communication, opportunities for growth, and a supportive work environment all play a critical role in ensuring that partners feel valued and invested in the partnership's success. Maintaining this sense of shared ownership is critical to retaining talent and fostering a culture of excellence. 

Reconnecting with Customers:  

The partnership acknowledges the need to rebuild and strengthen customer relationships. This involves a multi-pronged approach, encompassing initiatives like the reinstated "Never Knowingly Undersold" pledge, investment in enhanced visual merchandising, and improvements to both the online and in-store shopping experience. Understanding customer needs, providing exceptional customer service, and fostering a sense of community are essential components of this reconnection strategy. Active listening, personalized experiences, and a commitment to addressing customer feedback contribute to building loyalty and brand trust. Initiatives such as AI-driven menu analysis at Waitrose further demonstrate a focus on catering to customer preferences and evolving consumer trends. 

A Shared Future:  

The John Lewis Partnership's future depends on the continued collaboration and mutual success of partners and customers alike. Engaged and valued partners are more likely to provide exceptional service, fostering a positive and welcoming environment that attracts and retains customers. Satisfied customers, in turn, drive the business forward, enabling continued investment in the partnership, its partners, and its future. This symbiotic relationship is at the core of the partnership's identity and is key to its ability to navigate the complexities of the modern retail landscape. Creating an environment where both partners and customers feel valued and understood is essential for long-term success.