John Lewis has reported a £234 million loss and admitted it cannot afford to pay its employees their traditional annual bonus.
Losses were £78 million excluding exceptionals, the largest of which was a write-down in the value of Waitrose stores.
Last year, John Lewis made a profit of £181 million.
In the year to January 28, sales at Waitrose fell three percent to £12.25 billion across the partnership.
John Lewis blamed “economic backdrop and inflationary pressures” for the decline.
The bonus was worth three percent of the salary last year.
Group’s chairperson Sharon White apologised to the staff and said it had been a “tough” time.
She did, however, say that the balance sheet is still strong, with £1 billion in cash on hand and acknowledged that some of the group’s issues are self-inflicted.
In a letter to staff, she wrote: “Inflation has had a big impact on the Partnership and sent our costs soaring – up almost £180m on last year. We haven’t sat on our hands.
“We’ve been working hard to drive out costs. Negotiating better deals with suppliers and simplifying ranges in both brands.
“Shoppers felt the pain of inflation. Sales were £12.25bn, a 2% dip on the year: a combination of strong sales at John Lewis and a decline of 3% at Waitrose, reflecting that we had more customers – 20 million of them, 800,000 more than last year – but they bought less.
“The big online growth of the pandemic years was partly reversed. Shoppers shifted some of their grocery spending to the discounters.
White added: “It is also the case that we had some setbacks. Product supply challenges and a major fire in our Brinklow warehouse hit availability in Waitrose last summer. This was recovered through autumn and availability is now strong,”
“I am sorry that the loss means we won’t be able to share a bonus this year or do as much as we would like on pay.”
Waitrose, on the other hand, attracted more customers, “but they bought less,” according to White.
The loss was caused by lower sales and a decrease in the value of Waitrose stores.
White noted that shoppers were shifting some of their grocery spending to discounters.