John Lewis profits fall amid higher costs and competition

Its first-half pretax profit before exceptional items fell 26 percent to 96.7 million pounds due to the pension problem and higher costs at the John Lewis department stores business.

John Lewis believes reviving sales will come down to a renewed focus on omnichannel, with chairman Charlie Mayfield saying “the rapid rate of change in retail is set to continue and therefore the time is right for us to develop the thinking that will help sustain the Partnership in the next generation”.

Sales at department store group John Lewis, an Elite retailer in the IRUK500 research, reached £1.9bn, 3% ahead of the same time past year, on a like-for-like basis, which strips out the effect of store openings and closures.

John Lewis is trying to plug a hole of more than £1bn in its pension fund and it said the recent volatility in stock markets had made that job more hard.

However supermarket sector conditions have been tough, thanks primarily to the price wars between the Big Four and the budget challengers Aldi and Lidl.

And John Lewis expects to perform well relative to the market, aided by new product ranges and enhanced online capability.

Excluding these, at a trading level our profits were broadly level with past year, despite the turmoil in the grocery market.

It is moving to a combined defined benefit and defined contribution pension to help cut costs.

Combined gross sales of the group rose 2.1% year-on-year to GBP5.11 billion in the first half from GBP5.01 billion. Waitrose reported a 1.1% rise in revenue to GBP2.99 billion whilst John Lewis contributed the remaining GBP1.54 billion, which was up 3.6% year-on-year.

This has been a solid first half for the group in a hard market.

Sales at the Waitrose supermarket reached £3.1bn, down by 1.3% on a like-for-like basis, while operating profits hit £135.5m, 6.7% down on past year.

She added: “Today’s results from the high street retailer suggest wider concerns, with a slump in profits reflective of harsher trading conditions and higher pension charges”.