John Lewis, Britain's biggest department store group, cut its annual staff bonus for the first time in three years after posting a 3.8% fall in profit, showing even its affluent customer base has not been immune to straitened times.
The 148-year-old employee-owned firm said its 81,000 staff, known as partners, will be paid a bonus of 14% of salary, down from 18% last year.
John Lewis, which trades from 29 department stores, six John Lewis "at home" stores, 274 Waitrose supermarkets and online businesses, is seen as a retail bellwether in the UK.
The company's chairman Charlie Mayfield said while conditions were still difficult and consumer confidence remained subdued, John Lewis was continuing to grow faster than the market.
"I am cautiously optimistic that trading conditions may improve later this year," he said, noting the Queen's diamond jubilee celebrations and the London 2012 Olympic and Paralympic Games would provide a lift for consumers.
Mayfield expected the group to create 1,900 in 2012, having created 4,400 new jobs in 2011.
Many UK retailers are struggling as consumers grapple with inflation, muted wage growth, government austerity measures, worries about job security, a stagnant housing market and the impact of the euro zone debt crisis. The lack of consumption has been one of the main drags on economic growth.
While an industry survey this week said UK retail sales remained sluggish in February, latest official data showed they rose in January. That data, a string of promising business surveys and stabilisation in the labour market have raised hopes of recovery in 2012.
John Lewis said profit before tax and a staff bonus pool of £165m fell to £354m in the year to January 28. The 3.8% fall largely reflected investment across its systems and supply chain and a 20.4% decrease in department store operating profit to £158m due to more discounting in tough markets.
Operating profit at Waitrose fell 5.2% to £261m.
The group, the only major retailer to publish weekly sale figures, said total revenue increased 6.4% to £8.73 billion. It has been outperforming the wider market as its more affluent customers have generally coped better than lower income groups in the downturn.
After five weeks of its new financial year partnership sales excluding VAT sales tax were 7.7% higher, with like-for-like sales at department stores up 2.4%, and Waitrose up 2.2%.
