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 69,000 employees – which it calls partners – will share £35m, the equivalent of 2% of salary, after it recorded an increase in sales and profits. The payout amounts to about one extra week of pay.

Sales at the John Lewis Partnership 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 fell 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 bonus peaked in the 1980s, hitting 24% of salary, but dropped to single digits in 2017, hitting the lowest level since the 1950s as department stores started to come under pressure from the growth of online shopping.

The company opted not to give 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.”

Nick Bubb, an independent retail analyst, said the profits were disappointing and “a long way short of best hopes back in the early autumn”.

The company said it remained “cautious in our outlook for trading” but intended to continue making investments in its retail brands but had been able to pay a bonus because of “disciplined financial management”.

It said it would continue to seek ways of operating more efficiently this year and was investing in expanding its financial services as well as its retail businesses.

In the past year, Waitrose has experienced a return to form, with sales up 7% to £8.5bn and an operating profit of £256m, up almost 13%.

The department stores increased sales by 3% to £4.9bn, with underlying profit up 29% to £58m.

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.

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.