John Lewis profits fund 18% staff bonuses

Thousands of John Lewis partners were today celebrating a bonus windfall worth nearly two months' pay as the company defied a gloomy spell for retailers.

The employee-owned firm said a strong year for its department stores and supermarket Waitrose meant its 76,500 staff will share a bonus pot of £194.5 million, up from last year's pool of £151 million.

Chairman Charlie Mayfield announced plans to create 4,300 jobs this year and invest £600 million in the business, but warned trading would be more difficult in 2011.

The bonus payout came as the partnership posted a 20% rise in pre-tax profits to £367.9 million for the year to January 31, as sales soared 10.6% to £8.21 billion.

As has become tradition, John Lewis partners gathered this morning before their stores opened and were told the bonus they will receive this year - 18% of their salary, roughly nine weeks pay.

The store's managing director and a chosen star performer or long-serving partner unveil the payout - to applause and cheers from the assembled employees.

John Lewis department stores have outperformed rivals recently as its more affluent consumers were able to cope better during the recession.

The group performed well through the freezing conditions that swept the country in December, but weekly sales figures since the end of January have suggested customers are starting to spend more cautiously.

But five weeks into the new financial year, Partnership gross sales were still 6.5% higher than last year, as both Waitrose and the department stores posted growth.

Mr Mayfield said the Partnership benefited from its multi-channel approach, including its department store website, which saw sales grow 38% to £538.2 million, as well as Waitrose Deliver and its supply relationship with online grocer Ocado.

John Lewis department stores posted like-for-like sales growth of 10% during the year, with operating profit returning to pre-recession levels after increasing by 22% to £201.2 million.

The group said sales were driven by growth in most departments, with fashion up 15%, home ahead 12%, and electricals and home technology lifting 8%.

A further three "at home" shops opened in Croydon, Swindon and Tunbridge Wells in 2010 and another three openings are planned this year.

A new John Lewis department store on the Olympic site at Stratford, in east London, will open later this year.

Elsewhere, Waitrose saw food sales on a like-for-like basis grow 4%, excluding petrol, while operating profits increased 3% to £274.9 million.

Twenty new branches opened during the year, including nine convenience stores, plus three relocations.

But looking ahead, Mr Mayfield warned the VAT increase, rising unemployment and public sector spending cuts would have an impact on consumer spending.

He also warned input price inflation was a threat - but the company was not yet seeing the level of inflation widely reported.

Maureen Hinton, practice leader at retail analyst Verdict, said competitive pricing triggered a strong year of trade for the Partnership.

But she added: "The challenge is achieving similar levels of growth in 2011 which is already looking to be a far more difficult year for consumer confidence and spending."

John Lewis Partnership announced on Sunday that it is raising £50 million through a retail bond issue aimed at customers.