Video: John Lewis staff take home 14% bonus as profits dip

Total sales across the group were up 6.4% to £8.73bn in its year to January 28.

John Lewis department store like-for-like sales edged up 1.3%, however it dropped 0.6% excluding VAT. Operating profit plunged 20.4% to £157.9m.

At Waitrose, like-for-like food sales edged up 3.6%, or 3% excluding VAT. However, operating profit dipped 5.2% to £260.6m at the supermarket.

The group’s chairman Charlie Mayfield said the profits dip was down to increased investment to future-proof the retailer. It injected £21.3m into improving its operating structures over the year and £27.9m into new stores, up £11.2m on last year.

He said: “We have achieved a good sales performance in a tough year for the economy. Profound changes are taking place in the retail sector and importantly this was a year when we upped the pace of innovation and investment. This came at a price of some short-term profit but leaves us in a good place at the start of this year.”

“We start this year leaner and fitter and have initiatives underway which will deliver key benefits in the coming years.”

In the five weeks of its current year, Partnership sales, excluding VAT are 7.7% up on last year. Waitrose like-for-like sales have edged up 2.2% while John Lewis’s advanced 2.4%. Mayfield said he was “cautiously optimistic” that trading conditions will improve later in the year.

He said: “Current trading conditions are still difficult and consumer confidence remains subdued. Despite that we are continuing to grow faster than the market. The Queen’s Diamond Jubilee and the London 2012 Olympics will provide a lift for consumers.”

Major changes to how the group operates were made over the year, including an overhaul of how Waitrose shops are managed and the group’s largest programme of investment in systems and supply.

The retailer invested heavily in new product launches throughout the year. It increased the amount of new Waitrose product launches by 76% over the year and own label now accounts for 54% of sales, up 9% on last year.

In John Lewis it debuted new ranges including the Design Collective and John Lewis & Co.

It also invested an additional £23.8m in its ‘Never Knowingly Undersold’ pledge, although the group maintains that gross margin was substantially maintained.

The group also opened a record number of stores with 29 Waitrose shops, bringing its total to 272, and three John Lewis store opening throughout the period.

Over a fifth of the department stores sales now come from online. Mayfield said: “Our priority is to serve the multi-channel customer better than anyone else - it’s on that, and on innovation, that success in the future depends.”