The 148-year-old employee-owned group, whose stakeholder business model has been lauded by politicians including Prime Minister David Cameron, said on Wednesday its 77,217 permanent staff, known as partners, will be paid a bonus of 14 per cent of salary, equal to over seven weeks pay, down from 18 per cent last year.
John Lewis, which trades from 29 department stores, six John Lewis "at home" stores, 274 Waitrose supermarkets as well as online businesses, is seen as a UK retail bellwether.
It said it was "cautiously optimistic" trading conditions may improve later this year, with the Queen's Diamond Jubilee and the London 2012 Olympic and Paralympic Games providing a lift for consumers.
John Lewis said profit before tax and the staff bonus of £165.2m ($260m) was £353.8m in the year to 28 January.
That was down from £367.9m in the previous year, with the shortfall reflecting more discounting in its department stores as a result of its "never knowingly undersold" policy as well as investment in stores and staff.