John Lewis is considering suspending its staff bonus for the first time in 66 years in the wake of the worst Christmas for retailers since the depths of the financial crisis.

The employee-owned department store group, which also owns Waitrose, said it would “need to consider carefully … whether payment of a bonus is prudent in the light of business and economic prospects at that time”.

John Lewis’s warning came amid a slew of downbeat trading updates from some of the best-known names in the retail sector on what had been billed as “Super Thursday”.

Marks & Spencer and Debenhams reported a slump in sales over the crucial trading period and Halfords fired off a profit warning that wiped a fifth off the company’s value.

Quick guide Why are UK high street retailers in trouble? Show Hide What’s the problem? Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as unseasonable weather. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result. In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores. At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence. What help do retailers need? Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. They also want more political certainty as the potential for a no-deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs at the end of this year. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. What is the government doing? In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas. What is the outlook in 2020? Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further potential Brexit wobbles to come – retailers are facing another tough year in 2020. The latest rise in the national minimum wage in April will also add to costs and hit profits. On the plus side, there are hopes of a boost to the housing market from increased certainty about Brexit after the general election. There are also signs that the shift to online shopping is slowing, potentially easing the pressure on high streets. Sarah Butler Photograph: Matthew Horwood/Getty Images Europe

“These results show no abatement in the crisis of the high street,” said David Marshall, professor of marketing and consumer behaviour at the University of Edinburgh business school.

“High street footfall is down and price incentives do not appear to have attracted customers back into stores,” he said. “Online retail now accounts for one-fifth of retail sales and is likely to continue to increase as a proportion.”

Retailers’ profits are under pressure as they have been forced to discount heavily to win over nervous shoppers, spooked by political and economic uncertainty around Brexit. Shoppers have reined in spending on non-essentials amid fears for jobs and savings.

In December, official sales data showed online sales accounted for more than a fifth of total spending for the first time, underlining the challenge faced by bricks-and-mortar retailers in an increasingly digital age.

A report published on Thursday by the British Retail Consortium showed that in non-food sales more than 31% of trade has now moved to the internet.

Earlier this month the music and film retailer HMV called in administrators, blaming rising costs and falling sales. The Queen’s former dressmaker Hardy Amies and the upmarket slipper brand Mahabis have also fallen into administration in recent weeks.

Clothing retailers including Asos, Superdry and Bonmarché have issued profit warnings while Mothercare and Next admitted trading had been tough.

Patrick Lewis, finance director of the John Lewis Partnership, said the group could afford to pay a modest bonus but would wait until March to decide on the payout because of the “unusual economic circumstances” and a “higher level of volatility” around Brexit.

The company warned that profits would be substantially lower this year – despite a last-minute rush that eventually resulted in higher Christmas sales than last year – as a result of heavy discounting by rivals and weak consumer demand. While profits are expected to rise at Waitrose, they will be down sharply at the John Lewis department stores chain, mainly because of its “never knowingly undersold” policy of matching high street rivals’ discounts.

Department stores had a grim 2018 with the summer collapse of House of Fraser kicking off a wave of desperate discounting. Debenhams is also facing serious problems and its share price collapsed by 90% last year. John Lewis said there had been up to 30% more promotions by rival retailers over the Christmas period than in 2017.

The potential break in the annual staff bonus comes after John Lewis slashed its bonus last year to just 5% of salary – the lowest level of payout since the 1950s. The bonus – which was first paid in 1920 and is handed to all staff, from shelf stackers to senior management – has not been suspended since the postwar economic downturn of 1953, when rationing was still in place.

New high street data has shown that total sales growth dropped to zero in December for the first time since 2008 as shops were hit by Brexit worries and a dramatic fall in consumer confidence. The British Retail Consortium (BRC) figures showed that all areas of the high street were hit by a fall in sales last month except food, where there was intense competition among the major supermarket chains.

M&S blamed the weak economic environment for deterring shoppers, with both its food and clothing businesses suffering sales declines of more than 2% in the 13 weeks to 29 December.

The M&S chief executive, Steve Rowe, described its performance as steady in a difficult market: “The combination of reducing consumer confidence, mild weather, Black Friday and widespread discounting by our competitors made November a very challenging trading period.”

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Against the tough backdrop Tesco, the UK’s biggest retailer, emerged as one of winners with UK like-for-like sales up 2.2% over Christmas. It was the supermarket giant’s best performance in nearly a decade with its chief executive, Dave Lewis, describing it as a “very strong Christmas performance which was ahead of the market”.

Sainsbury's Christmas sales hit by struggles at Argos Read more

Earlier this week Aldi said it had a record Christmas as a growing number of Britons switch some of their grocery shopping away from the traditional supermarket chains. Lewis said there had been a “flight to value” at Tesco, with shoppers seeking out its no-frills ranges to save money, while its upmarket finest ranges had also done well.

“There is no doubt that the whole retail sector had a disappointing November, which set the tone for what can only be viewed as a poor Christmas,” said Greg Lawless, a retail analyst at the City stockbroker Shore Capital.