Profits at the John Lewis Partnership have crashed by 99 per cent in the first half of the year, sparking concerns it could be the next high street retailer faced with closure.
The department store chain has blamed “challenging times” in the retail sector for the slump, admitting it has struggled to compete with rivals in the promotional market for nearly a decade.
A difficult market
John Lewis & Partners, which includes supermarket Waitrose, showed its profits sank by a staggering 99 per cent during the first six months of 2018, to just £1.2 million.
Despite efforts to keep prices low with “unprecedented” levels of price matching, the group profits have continued to be squeezed by strong competition from other retailers.
It has also warned that the full-year profits are expected to be “substantially lower”.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said: “These are challenging times in retail.
“With the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, forecasting is particularly difficult, but we continue to expect full-year profits to be substantially lower than last year for the Partnership as a whole.”
He also added the group was seeing the “most promotional market we’ve seen in almost a decade”, with other retailers discounting heavily.
The firm recently rolled out the & Partners re-brand across the group and put in place a strategy update over profits in June, when it announced the closure of four Waitrose convenience shops and a small supermarket, affecting around 200 staff.
The half-year results showed on a statutory basis, pre-tax profits slumped by 80.5 per cent to £6 million.
John Lewis department stores experienced an operating loss of £19.2 million from earnings of £54.4 million a year earlier, while like-for-like sales at the chain fell by 1.2 per cent.
At Waitrose, like-for-like sales were up by 2.6 per cent, thanks to an improvement in the second quarter, although operating profits fell by 12.2 per cent to £96.4 million.
The group expects profit growth in Waitrose to continue to be offset by the squeeze at John Lewis, and has pledged to continue with plans to invest in the group.
It will continue to invest between £400 million and £500 million per year in the business, despite facing pressures on its profits to drive long-term growth.
Sir Charlie said: “This will take a lot of hard work from all of our partners, but we are confident in our commitment, drive and ability to deliver the partnership’s strategy.”