John Lewis profits fall in difficult market
John Lewis has reported that pre-tax profit before exceptional items dropped by 26% to Â£96 million in the first half of its financial year.
The Partnership’s chairman Sir Charlie Mayfield said the fall was predominantly driven by higher pension charges arising from “volatility in the market driven assumptions” and last year’s property profits.
Excluding these, he said profits at a trading level were broadly level with last year, despite turmoil in the grocery market.
Like-for-like sales at the John Lewis department store chain climbed by 3% in the period as it achieved gross sales of £1.94 billion.
Operating profit fell by 16.3% to £47.1 million as the retailer was hit by restructuring costs, incremental costs for holiday pay and the absorption of a greater share of centrally incurred functional costs. John Lewis Partnership said it was also a reflection of costs associated with the ongoing shift in both channel and fulfilment mix.
Looking at the product categories, fashion sales climbed by 7.5% while home sales rose by 4.9%. Electricals and home technology fared less well, with sales edging down 0.7%, as trade was impacted by a lack of new product launches in the home technology market.
Meanwhile, gross sales for the first half at Waitrose grew by 1.1% to £3.18 billion, although like-for-like sales were down 1.3%. The supermarket said it had on average 280,000 more customer transactions each week compared to the same period last year, with total volume growth of 1.8% and its market share rising to 5.1%.
Waitrose’s operating profit before property profits was up 0.6% to £135.5 million, despite incremental costs for holiday pay and the absorption of a greater share of centrally incurred functional costs.
The supermarket opened five new branches in the first half, including one acquisition, two relocations and one convenience store, and announced the planned closure of two convenience stores.
Looking ahead to the Partnership’s performance in the full year, Mayfield said he expected conditions in the market to remain difficult, especially in grocery.
For the full year, John Lewis Partnership pension charges will be approximately £60 million higher than the comparable figure last year. Mayfield said even a strong trading performance would be unlikely to offset this fully in the current market and therefore profit before Partnership bonus, tax and exceptionals is expected to be between £270 million and £320 million, compared to £342.7 million last year.
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