March 6, 2014 / 10:06 AM / in 4 years

UPDATE 2-UK's John Lewis retailer sees improving macro picture

* 2013-14 underlying pretax profit 376.4, up 9.6 pct

* FY sales exceed 10 bln stg for first time

* Staff to get bonus of 15 pct of salary, down from 17 pct last yr

* John Lewis MD targets 2014-15 sales growth of 6 pct

* Waitrose MD expects 2014-15 sales growth of 7-8 pct

By James Davey

LONDON, March 6 (Reuters) - British retailer, John Lewis Partnership , forecast an improving economic backdrop as 2014 progresses after posting a 10 percent rise in profits.

It said it would pay its staff - who are all partners - a bonus equal to nearly eight weeks pay.

Data and surveys have shown an improving outlook for UK consumer spending, which generates about two thirds of gross domestic product, but retailers have been wary as inflation continues to outpace wage rises.

Last month grocer Asda warned Britain’s economic recovery was fragile, with huge regional variations.

However, on Thursday Charlie Mayfield, chairman of employee-owned John Lewis, which runs Britain’s biggest department store chain as well as upmarket grocer Waitrose, struck a more upbeat tone.

“We feel more optimistic about the macro picture in the economy, all the economic indicators are moving in the right direction,” he told reporters.

“We haven’t seen that feeding through into a buoyant mood in terms of consumption and consumer expenditure. But my view is that that will improve as the year goes on,” he said, pointing to Britain’s rising housing market and an expectation that pay settlements will start to move ahead of inflation.

The 150-year-old group, whose worker co-ownership business model has been lauded by Prime Minister David Cameron, made a profit before tax, staff bonus and one off items of 376.4 million pounds ($630 million) in the year to Jan. 25, on record sales of 10.2 billion pounds, up 6.6 percent.


John Lewis’ 91,000 staff will be paid a bonus of 15 percent of salary, totalling 202.5 million pounds.

That was lower than the previous year’s 17 percent, reflecting the increased costs of a 10-year plan to remove the group’s just over 1 billion pounds pension deficit.

While rivals, such as Marks & Spencer and Debenhams have toiled, John Lewis has consistently bucked retail gloom, winning market share over the last five years.

Its generally more affluent customers were less impacted by the economic downturn and it has a bias to the more prosperous south east of England. A big push online, improvements to stores, products, service, promotions and marketing, have also chimed with shoppers.

Analysts reckon John Lewis’ partnership structure is helping it to outperform rivals, acting as both a motivator for staff and as a facilitator for long-range decision making.

The group, the only major British retailer to publish weekly sales figures, said Waitrose’s like-for-like sales, excluding petrol, increased 3.7 percent in the first five weeks of the 2014-15 year, while John Lewis’ like-for-like sales were up 5.3 percent.

Waitrose managing director Mark Price forecast sales growth in 2014-15 of 7-8 percent, with like-for-like sales up 3.5 percent.

“Whatever happens we’re determined to use our very strong balance sheet to keep Waitrose competitive on price,” Price said in relation to recent announcements on price investment by Asda, Tesco and The Co-op.

John Lewis manaing director Andy Street is targeting a sales rise of about 6 percent this year.

“I‘m pretty sure that would be another decisive outperformance of the market,” he said.

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