John Lewis reports sharp drop in operating profits
The John Lewis department store chain has reported a sharp drop in profits after a six month struggle with Â“extremely challenging trading conditionsÂ”.
Operating profit fell by 55% to £15.8 million in the half year to 30 July despite a 1% increase in like-for-like sales. The John Lewis, 'Never Knowingly Undersold' promise meant that the retailer was forced to match heavy dsicounting offered by its competitors. Profits were also hit by continued investment in new stores.
Pre-tax profits across the John Lewis Partnership declined by 18% to £90.4 million as planned investment combined with a "highly competitive trading environment" held back profit delivery.
Waitrose, the Partnership's supermarket arm, saw profits fall by 13.8% to £110.2 million as it absorbed the majority of inflation within its prices. Sales were up 8.7% to £2.6 billion.
Although the Partnership expects trading conditions to remain challenging in 2012, Chairman Charlie Mayfield said: "After six weeks, Partnership gross sales are 7.4% higher than last year. Waitrose gross sales have increased by 10.0% (3.9% like-for-like) and John Lewis gross sales are 3.2% higher than last year (1.9% like-for-like).
"There are huge changes taking place in the way people shop as a result of technology reaching every part of our lives, and there is an ever greater demand for convenience and value. We are not simply waiting for the recovery, but instead we have increased the pace of investment and innovation across the Partnership putting us in the best possible position to seize the opportunity created by a rapidly changing retail environment. Our momentum is strong and I am confident we will build on that in the second half."
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