John Lewis staff face bonus crunch, but there are grounds for optimism

Partners will get 3 per cent this year. It hasn't been that low since the 1950s

Partners at John Lewis have been told their bonuses will be just 3 per cent this year, the lowest in more than half a century (EPA-EFE)

I imagine John Lewis’s staff - who own the business as partners - were probably braced for bad news come bonus time. They certainly should have been.

With profits plunging by 45 per cent to £160m, their annual payments this year will amount to just 3 per cent of their salaries.

No one working at the retailer now will have experienced anything like that.

You have to go back to 1954 to find a comparable number, when their grandparents, great-grandparents in some cases, received 4 per cent.

But there are reasons to feel cheerful even if it might not look that way.

For a start, John Lewis is one of those vanishingly rare institutions in Britain in which everyone who works there really is in it together.

Retail CEOs regularly pick up millions for doing far worse than the leadership of this one, where there are no such rewards for failure. Lewis bosses do fairly well for themselves, but the salary of the top paid executive is fixed to a multiple (75) of the average hourly rate of non management partners. You won’t find anything like that at the retailers which are listed on the stock market.

They also get the same percentage bonus that everyone else does. There are none of the free shares other retail bosses get through long term incentive schemes, which aren’t really long term and only incentivise them to feather their own nests.

That’s has to be worth something.

Better still is the fact that John Lewis isn’t firing people in the way other retailers are, retailers that are barely making any money at all.

John Lewis’ numbers aren’t pretty. They have been hit as a result of its IT investments, various one off costs, and the fact that the chain, which also owns Waitrose, has had to respond to the widespread discounting that’s been going on as reeling rivals struggle to make sales.

The latter causes a particular problem for a chain that boasts of “never being knowingly undersold”.

Thing is, the discounting it's been forced to match isn’t sustainable. It will die off as struggling rivals die off, if not before.

At some point you can see there being maybe two or three general retailers left on the British high street. One of them will be John Lewis. Another will be Mike Ashley’s ‘Harrods of the High Street’ amounting to an amalgamation of what's left of House of Fraser and (probably) Debenhams.

Which one of those two would your prefer to shop at? Which one of those would you prefer to work at?

Internet retail is blowing an ill wind through British retail, but eventually the market will find a new equilibrium and a bricks and clicks outfit like the Partnership should prosper within it.

A pay cut is never good, and this is what John Lewis partners are experiencing. But it’s possible to see better times ahead for this unique and well run business.