The John Lewis Partnership has reported a 53% fall in half-year profits, despite sales growth at both its Waitrose supermarkets and department stores.
The employee-owned group blamed higher costs and “dampened customer demand”.
Profit before tax came in at £26.6m for the six months to 29 July – held back by a string of costs including restructuring and pension charges, while it also raised pay for non-management partners.
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However, gross sales were up 2.3% for both brands – with revenue hitting almost £4.8bn, up 2.2% on the same period last year.
Operating profit before exceptional items and property profits was up 10% in John Lewis, but trading profits for Waitrose were 18% lower.
Image: John Lewis says Waitrose has not passed on many price increases to customers
It said the figure reflected the chain’s decision to pass on “few” increased costs to shoppers.
The cost of many imported goods for retailers has shot up in the wake of the Brexit vote because of the weakness of the pound – leaving stores under pressure to cut margins or raise in-store prices.
Partnership chairman Sir Charlie Mayfield said: “The first half of this year has seen inflationary pressures driven byexchange rates and political uncertainty.
“These have dampened customer demand, especially in categories connected to the housing market.
“The exchange rate-driven increase in cost prices has also put pressure on margin.”
Group rivals Morrisons and Next, which also reported on their half-year performances on Thursday, raised their profit guidance for the full year.
Image: Morrisons has managed to arrest years of declining sales
Morrisons – one of the so-called big four supermarket chains – said it had achieved seven consecutive quarters of sales growth as its turnaround plan continued to deliver improvements to shoppers.
It said like for like sales grew 3% while pre-tax profits were up 40% to £200m.
Next signalled it may have been overly cautious in its previous expectations though total sales were down 2.2% in its first half and profits almost 10% lower. Shares rose 10% in early deals.
Nevertheless, all three groups pointed to a tough trading environment as customers’ budgets are squeezed by the effects of inflation outpacing wage growth.
Sir Charlie added: “Our full year profits will depend, as they always do, on the final quarter which typically accounts for well over half of our profits before exceptional items.
“We expect margin pressure to continue into the second half year and we will incur higher pension accounting charges, as a result of low market interest rates at the start of the year. These will impact our overall profits.”