The John Lewis Partnership will not give staff members a bonus for the first time since 1953 after the staff-owned business was hit by lockdown.
The announcement comes as the group said it plunged to a £635 million pre-tax loss for the six months to July 25 after being impacted by a £470 million write-down on its stores.
Dame Sharon White, chairwoman of the retail group, told partners on Thursday that the announcement “will come as a blow”.
She said the company, outside of exceptional circumstances, would now expect to pay out a bonus again once its profits exceed £150 million.
Sales across the group increased by 1.1 per cent to £5.56 billion for the half-year, but the company saw higher sales of “less profitable lines such as laptops and loo rolls”.
However, it also benefited from Government subsidies and expects the business rates holiday for the current year to offset pandemic-related costs by around £50 million.
John Lewis saw total sales slip by 10 per cent for the period, as online growth partially offset the impact of store closures. Online sales were “strong” with 73 per cent growth during the period, Dame Sharon said.
The department store business has seen sales momentum “starting to build” since reopening sites, with sales around 30 per cent lower than the same period last year, but ahead of expectations.
It said stores in retail parks are down by around 15 per cent with city centre sites particularly impacted by a slump in footfall, with London stores reporting a 40 per cent slump.
The company added that a shift towards increased home working has impacted people’s purchases, with increased sales of tablets and TVs, while trouser sales have fallen.
Meanwhile, the group’s Waitrose grocery business saw like-for-like sales increase by almost 10 per cent for the period as shoppers continued to go to supermarkets.
It said online shopping demand has remained strong with the company now delivering around 170,000 weekly orders, up from around 60,000 before the pandemic.
Waitrose.com has also seen a “strong pick-up in demand” since ending its delivery partnership with Ocado at the start of September.
It said it also has plans to add 25 more locations to its rapid-delivery trial with Deliveroo as it continues to expand its online proposition.
Dame Sharon said: “The pandemic has brought forward changes in consumer shopping habits which might have taken five years into five months.
“Both brands entered the crisis with strong and established online businesses and in the case of Waitrose, plans for expansion well under way in preparation for the end of the relationship with Ocado.
“Our digital businesses have been key to underpinning our first-half performance.”
She also told staff that the company’s new strategy is “taking shape” and will reveal more details next month.
The update comes a day after the group revealed plans to shut four of its Waitrose supermarket stores, with the loss of 124 jobs.
In July, John Lewis announced the closure of eight stores, including in Birmingham and Watford, in a move which put 1,300 jobs at risk.
It also emerged this week that the group has drawn up plans for a massive reduction in the size of its Oxford Street store , which will come into force if shoppers continue to stay away from the West End.
The Standard learned that the business has asked Westminster council to approve plans that allow it to cut trading space by almost 40 per cent.
Documents show that the third, fourth and fifth floors — which house departments such as kitchens and bathrooms, the Christmas shop, toys and children’s books and TV and audio — would be converted into offices to rent out.
This would leave tills on only the basement, ground, first and second floors, while the largely unused sixth, seventh and eighth levels would also be turned into offices.