The owner of John Lewis and Waitrose has paid an annual bonus to workers for the first time in four years after underlying profits rose by 6%.

The retail group’s employees – which it calls partners – will receive a 2% bonus after it recorded an increase in sales and profits.

Sales rose 5% to £13.4bn and profits increased to £134m in the year to 31 January, slightly behind expectations in what the chair, Jason Tarry, called “a subdued market”.

He said profits had been hit by £40m in additional national insurance contributions and £13m in new packaging levies. The company dived to a loss of £21m before tax after one-offs including the write-down of old technology. That compares with a profit of £97m the year before.

The staff-owned group has not paid a bonus in four out of the previous five years, after diving to a loss during the Covid pandemic, when it was forced to close all stores during lockdowns.

The company opted not to hand out a bonus last year despite tripling its annual profits.

The retail group is in the midst of a turnaround plan, in which 16 department stores and at least 20 Waitrose outlets have been closed and thousands of head office staff jobs cut.

Tarry said: “Our multiyear plan to invest in customers and our brands for the long term is working; we have grown customer numbers and achieved record satisfaction.

“Despite a subdued market, a challenging lead into the crucial peak period and increased taxes, we took the decision to continue investing in the business, and have delivered cash and profit growth.”

Last summer the company indicated in an internal update that staff could be in line for a bonus if it beat a £200m profit target. A number of workers had signed an open letter calling on bosses to bring back the bonus.

At its peak during the 1980s, the retailer paid an annual bonus worth as much as 24% of employee salaries.

The company is spending £800m across its stores as part of a long-term investment. More than 20 Waitrose stores have been refurbished over the past year, as well as five John Lewis shops.

John Lewis also launched the Topshop brand across all 32 department stores last month as it tried to sharpen the appeal of its fashion floors.

Tarry has also pulled the plug on the partnership’s long-term plan to build as many as 10,000 rental properties in order to focus further on retail.