Britain's John Lewis Partnership posted a 9% fall in underlying profit today after an industry price war hit its Waitrose supermarket business, forcing it to cut its staff bonus payout for a second year in a row.
The 150-year-old employee-owned group runs Britain's biggest department store chain as well as its sixth largest supermarket.
It said today that Waitrose operating profit slumped 23.4% due to brutally competitive market conditions and higher investment costs.
That overshadowed the fact that the group's Waitrose has been winning customers, with total sales for the year up 6.5% to £6.51 billion, securing it a record 5.4% share according to market research firm Kantar Worldpanel.
The price war in the sector, and deflation in some food categories, resulted in like-for-like sales falling 2.8%, excluding petrol, in the first five weeks of the current year, the company said.
"We expect the returns for the grocery sector to be materially lower for a period of time," it added.
As a group, the Partnership reported profit before tax and exceptional items down 9% to £342.7m.
John Lewis said its 90,000 staff, known as partners, would be paid a bonus of 11% of salary, equal to nearly six weeks pay, down from 15% last year.
It said that the outlook for its John Lewis department stores in contrast was "robust".
Sales at the chain, which has developed a successful online business to complement its stores, rose 9.2% to £4.43 billion, and operating profit rose 10.8% to £250.5m, it said.
The department stores business has consistently won market share over the last five years, as its generally more affluent customers avoided the worst of the economic downturn and it has a bias to the more prosperous south east of England.