A fall in profits has forced the retailer to reduce staff bonuses to the lowest level in almost 70 years and undertake a business review.
The John Lewis Partnership is owned by its staff, who are known as partners and usually receive an annual bonus. This year, the bonuses have been set at just 2%.
Retail analyst Richard Hyman told the BBC that the firm’s staff bonus scheme was an “absolutely fundamental” part of its ethos: “The key competitive edge John Lewis has is customer service, that is delivered by its staff. If you take away part of their remuneration, then customer service levels are likely to be impacted. “
Profits fell by 23% last year to £123m, marking the third year in a row that profits have fallen, which the retailer has attributed to a slowdown in consumer spending, and reduced profitability following weaker sales of home and electrical goods.
The partnership has launched a review of the business which it said would involve “right sizing” its stores across both the John Lewis and Waitrose brands. The company stated that the review would involve store closures “where necessary”, as well as space reduction in existing stores.
Sharon White, who took over last month as chair of the John Lewis Partnership, said the changes would herald a vital new phase, and said she was confident the business would be stronger as a result.
She commented: “We need to reverse our profit decline and return to growth so that we can invest more in our customers and in our partners. This will require a transformation in how we operate as a partnership and could take three to five years to show results.”
The conclusions of the review are expected to be announced in September.