Waitrose & Partners' Parent Sees 99% Slump In First Half Profits

Lloyd Doyle
September 15, 2018

"It is especially so this half year", Sir Charlie added, "driven mainly by John Lewis & Partners where gross margin has been squeezed in what has been the most promotional market we've seen in nearly a decade".

In the retailer's interim half-year financial report, which also included Waitrose results, the firm showed a 99% drop in profits in the first six months of 2018, in comparison with the same period a year ago.

The owner of the department store chain and Waitrose supermarkets had warned in June that its half-year profits would be obliterated.

That was despite gross sales rising 1.6% to nearly £5.5bn.

"It's rather easy for a business to blame Brexit and the politicians rather than take responsibility for their own situation".

"We expect profit growth in Waitrose & Partners will be offset by the continuing margin pressure in John Lewis & Partners and by incremental costs of investment".

Waitrose profits were also down, falling 12.2% to £96.4m in the first half despite a 2.1% rise in sales to £3.4bn. Rival House of Fraser fell into administration and is not the only retail chain to have succumbed to the huge pressures faced by businesses in the sector.

Fenwick and Debenhams (Frankfurt: D2T.F - news) are among others facing fierce headwinds.

Chairman Charlie Mayfield said discounting was at the highest level for a decade, and the number of across-the-board promotions by struggling rivals had doubled year-on-year.

"This is reflected in both brands continuing to grow sales and customer numbers, and our total net debts reducing".

Looking ahead, John Lewis said it expected full-year profits to be "substantially lower than last year" for the group, although the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, meant forecasting was particularly hard.

"The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness".

John Lewis's 50 department stores and home shops made an operating loss before exceptionals of 19.3 million pounds, hit also by a decision not to pass on all the cost inflation from a weaker pound, it said.

Commenting on the figures Russ Mould, investment director at AJ Bell, said: "A decade or so ago, John Lewis was the envy of the retail world with tens of thousands of staff picking up generous bonuses on the back of rising profits".

"Profit margins have been hit by the need to cut prices to stay competitive".

He added that Waitrose would not be able to stockpile goods in case food deliveries from the European Union were interrupted, adding: "It rots, and you waste it".

Other reports by Iphone Fresh

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