By James Davey
LONDON (Reuters) - British retailer John Lewis reported sharply lower annual losses on Thursday and restored its staff bonus, saying its recovery is gaining momentum, but cautioned that inflation would weigh on the outlook for 2022.
Sharon White, the former Treasury official and telecoms watchdog who now chairs the employee-owned John Lewis Partnership, said Russia's invasion of Ukraine had worsened an already difficult inflationary backdrop.
"Clearly it is building in more inflation in probably a more permanent and more systemic fashion," she told reporters.
The partnership, which runs John Lewis department stores and Waitrose supermarkets, would tackle the cost of living crunch for its customers by doubling efforts to be "the go-to brands for service, quality, sustainability" while "increasingly thinking about the value proposition", she said.
However, the 158-year-old group said it had raised some prices this year.
The partnership has been hit hard by the COVID-19 pandemic but is now in recovery mode, registering a pretax loss of 26 million pounds ($34.3 million) in the year to Jan. 29, versus a loss of 517 million pounds in 2020-21.
Profit before exceptional items rose 38% to 181 million pounds and a 3% bonus will be paid to its 80,000 employees, known by the company as "partners". The bonuses are equivalent to one and a half weeks' pay and total 46 million pounds.
White is in the second year of a five-year recovery plan. She has closed stores and cut jobs but is investing 1 billion pounds in its online operation and store improvements, seeking more partnerships and diversifying so that 40% of profit comes from outside retail by 2030.
She is seeking efficiency savings of 300 million pounds a year by 2022 and targeting annual profit of 400 million pounds by year five.
The group cut costs by 170 million pounds in its 2021-22 financial year.
Total partnership sales rose 1% to 12.5 billion pounds, with John Lewis increasing sales by 4% to 4.93 billion pounds, with Waitrose sales down 1% at 7.54 billion pounds.
"The turnaround, the transformation of the partnership, is very much on track," said White.
Exceptional charges of 161 million pounds were booked, mostly for restructuring costs, property lease exit costs and a further small writedown on the value of John Lewis stores.
The partnership has committed to paying the voluntary Real Living Wage nationwide and has set this year's pay review at 2%.
($1 = 0.7583 pounds)