John Lewis has said it will reinstate a bonus of 3% for its partners after profits rose 38% across the business.

John Lewis achieved its highest ever sales of £4.93b, up 8% on a like-for-like basis, a 10% improvement on two years ago. This is despite having 16 fewer stores than the previous year and enforced store closures for a period of 10 weeks during lockdowns.

The Partnership said that online accounted for two thirds of sales over the year. Across the wider group, profits (before exceptional items) jumped 38% year on year to £181m in the full year to 29th January. On this measure, profits were 159% better than pre-pandemic figures.

However, when exceptionals were taken into account, John Lewis Partnerships made a pre-tax loss of £26m – an improvement on the £517m loss it made the previous year, when it faced a big write-down in the value of its store estate.

The Partnership has vowed to invest £54m in pay, guaranteeing to pay voluntary Real Living Wage nationwide. This means staff will benefit from a 2% pay rise this year, alongside the 3% bonus.

John Lewis Partnership chair Dame Sharon White told staff: “I want to thank you for your commitment and dedication in what has been another tough year. With the pandemic and with so much change within our business, I don’t underestimate the personal impact and I am truly grateful. As we head into the second year of the Partnership Plan, our five year strategy to transform the business, we’re gaining momentum in the most competitive retail market in history. Our focus on quality, value, sustainability and exceptional service is serving us well.”

The Partnership cut costs by £170m over the year, a major factor behind its profit growth, reducing management roles in stores and reducing central teams. Eight John Lewis stores and a delivery hub were closed. Dame Sharon White added: “We have made a good start to our Partnership Plan but are only one year through our five year transformation. Looking ahead, we see continued uncertainty from global events, affecting the economic environment, our customers, partners and society. As inflation and energy prices rise, our customers face higher living costs. While this creates uncertainties as we look ahead, we remain focused on investing significantly in our Partnership Plan to transform and grow our business.”

In the year ahead, the company plans to invest £119m into its department stores, digital services and distribution capabilities. £500m has been ringfenced to provide John Lewis customers with “everyday quality and value” and improving the MyJL Loyalty proposition.

The retailer will also develop its property rental proposition and roll out its financial services arm in the year ahead.