John Lewis Partnership profits have nosedived as a result of pressures in the retail market and higher staff pay.
In the first half of the year to July, profit before tax fell by 14.7% to £81.9 million as a result of ‘deep structural changes’ in the retail market. These pressures were expected to continue through this year and next.
The Group’s gross sales increased by 3.1% with both Waitrose and John Lewis seeing increased market shares and rising customer numbers, despite ‘challenging’ markets.
Sir Charlie Mayfield, chairman of John Lewis Partnership, commented: “We have grown gross sales and market share across both Waitrose and John Lewis, but our profits are down. This reflects market conditions and, in particular, steps we are taking to adapt the Partnership for the future.”
Mayfield gave his assurances that these results were not a consequence of the EU referendum result and added that it “has had little quantifiable impact on sales so far”.
“Instead there are far-reaching changes taking place in society, in retail and in the workplace that have much greater implications,” he said.
The Partnership’s operating profit also took a hit, falling by £159.2m or 58.3% on last year to £113.7m.
John Lewis saw sales increase by 4.5% to £2.02 billion, and like-for-like sales growth of 3.1%.
However, operating profit for the John Lewis retail operation fell by 31.2% to £32.4m. John Lewis attributed more than half of this decline to transitioning costs in its distribution network as it tries to smooth the transition to its Magna Park campus.
The Magna Park campus was part of a £150m investment and will open this month. The company hopes it will streamline its distribution network, making it more productive and offering a better service to customers.
John Lewis also saw an increase in online sales, accounting for 34.5% of total merchandise sales, up from 30.6% last year.