John Lewis took a sharp hit to its profits in the six months to 30 July 2016 citing challenging market conditions and steps the employee-owned business is taking “to adapt the Partnership for the future”.
Profit before tax dropped by 14.7% to £81.9m against improved sales of £5.27bn (up 3.1%). Chairman of the John Lewis Partnership Sir Charlie Mayfield said the business had grown sales across both John Lewis and supermarket Waitrose but that profits were down, which “reflects market conditions and, in particular, steps we are taking to adapt the Partnership for the future.”
He stressed the business had not been affected by the outcome of the EU referendum in June. “[That] 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,” Mayfield said.
During period sales at John Lewis were up 4.5% while Waitrose posted a 2.2% increase but the decrease in profit was down to a number of factors such as John Lewis’ commitment to price matching its competitors and improving pay for staff. “Our commitment to competitive pricing, excellent service, maintaining pay differentials and investing for the long term have held back profits. We expect these pressures to continue through this year and next,” Mayfield said.
First half profits are always more volatile than the second half, which usually accounts for around two thirds of the year’s profits, Mayfield stressed in his chairman’s overview. Nonetheless given the hit to profits the business was taking some mitigating steps such as deprioritising investment in IT and new Waitrose stores, and as such it has written down £25m in property assets that will no longer be developed.
