UPDATE 2-John Lewis department store boss to go after woeful Christmas

John Lewis Partnership on Thursday cut its annual profit forecast after weak Christmas sales and said the head of its department stores would go, laying bare the pressure facing one of Britain's best known store chains.

A major presence in most British cities, John Lewis has been hammered by a weak economy, the cost of restructuring its operations for the digital age and competition from cheaper online outlets. The Partnership, which runs department stores and up-market supermarket Waitrose, said profit before exceptionals would be "significantly" lower than last year, with earnings from the general stores "substantially" down.

The retailer said it might not pay a staff bonus for the first time in 67 years. "The Partnership Board will meet in February to decide whether it is prudent to pay a Partnership Bonus," Chairman Charlie Mayfield said. "The decision will be influenced by our level of profitability, planned investment and maintaining the strength of our balance sheet."

John Lewis is an employee-owned business which usually rewards staff with an annual payout equivalent to a percentage of their salary. The last time the Partnership did not pay a bonus was in 1953. Facing one of the toughest periods in its 155-year-history, the group said Paula Nickolds, managing director of the department stores, would leave in February after three years in the job.

Her departure will increase the task facing Sharon White, a former telecoms regulator and government official with no retail experience who will replace Mayfield at the same time. The group said Nickolds would leave "after some reflection on the responsibilities of her proposed new role."

Like rival department stores in Britain, John Lewis has been under pressure for some time, and in March last year the group reported a 45% drop in full-year profit and cut its staff bonus to the lowest level in 66 years. Over Christmas, the group's sales fell 1.8% in the seven weeks to Jan.4, with department store sales down 2% on an underlying basis and Waitrose sales up 0.4%.

It enjoyed strong growth in beauty sales, a flat performance in fashion and weak demand for home sales and electricals.

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