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Living wage will have only a 'modest effect' on John Lewis

The national living wage will have an impact on pricing, productivity and employment across the retail sector, but John Lewis is unlikely to suffer a significant blow, the partnership’s chairman Charlie Mayfield said today.

This morning Next warned its prices could rise by 6% as it seeks to offset the cost of implementing the living wage, which will rise to £7.20 per hour for over-25s next April and to £9 by 2020. But Mayfield said this would have only a “modest effect” on John Lewis, in the short term at least.

“We have a very different pay policy to most of our competitors; we pay people as much as we can based on performance, so there is a broad range. The effect of the living wage will be very modest indeed. The majority are already above that level [£7.20].”

John Lewis Partnership does not factor age into its pay rates and Mayfield said that would “continue to be the case for the moment, but we will see how the market evolves”.

On the fall in half-year profits reported this morning, Mayfield emphasised that it was “due pretty much entirely to higher pension costs”. John Lewis is one of the few companies that is still running a large final salary scheme, he pointed out.

Mayfield insisted that first-half profits are often volatile: “You always get these big swings. John Lewis makes roughly three to four times more profit in the second half.”

He warned against making any snap judgements about the impact on staff bonuses: “You can’t take our guidance/profit and say the bonus will be X. It’s a judgement reached by the board weighing up different factors.

“Having said that, it’s important we’re clear about the impact of the pension charges on our profits – the last thing I’d want to have is people not knowing and being surprised at the end of the year.

“Focusing on good trading and doing a good job could make a big difference to profits. We started the second half strongly; we’re going into it in a better position than we did in the first.”

John Lewis managing director Andy Street said the decision to charge £2 for click-and-collect services on orders under £30 from the end of July had gone “as expected” so far.

“Some customers have traded up to avoid paying the charge, some have paid it and [in some cases] we have lost the sales, which is exactly as expected.”

Asked if it was deemed a success, he said: “It’s too soon to judge, but it’s going to plan and we definitely believe we did the right thing.”

 

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