The owner of John Lewis and Waitrose has said its losses nearly tripled to £88m in the first half of this year, as it took a hit from restructuring costs as well as new tax and regulatory charges.
John Lewis Partnership, which operates 36 department stores and more than 300 Waitrose supermarkets, said new packaging regulations and increased national insurance contributions had cost it £29m, while it spent £54m on restructuring its business, mainly on replacing outdated technology.
As a result, the employee-owned group’s half year pre-tax losses widened from £30m over the same period a year before, despite a 4% rise in sales to £6.2bn in the six months to 26 July.
The group said it expected the “macroeconomic environment to remain challenging”, but it was stepping up investment so that it was “positioned to deliver full-year profit growth”. John Lewis traditionally makes all its profit in the second half of the year and expects this year to be the same.
Independent analyst Nick Bubb suggested the group could be on track to make £200m profit before one-off costs for the full year, up from £126m a year before.
Peter Ruis, the boss of the John Lewis department stores, said shoppers were “looking for a wonderful escapist Christmas to get away from the doom and gloom” and were feeling more optimistic, despite high energy costs, as mortgage rates had come down.
John Lewis workers are hoping for a revival in annual profits as they have not received an annual bonus since 2022.
Jason Tarry, chair of the partnership, said: “We are committed to paying a bonus as soon as we possibly can”. However, he added it was “far too early in the year” to make any predictions on the annual bonus payable in the spring.
“Our clear focus on accelerating investment in our customers and our brands is working: more customers are shopping with us, driving sales, and helping Waitrose and John Lewis outperform their markets.”
He said the business was offsetting rising costs with productivity improvements and he hoped the chancellor would “make sure [the government’s] manifesto promise is going ahead” and there would be no increase in business rates for retailers.
First-half sales at Waitrose rose by 6% to £4.1bn as underlying profits slipped back £3m to £110m.
In the department store business, sales rose by 2% to £2.1bn as John Lewis said it was “outperforming a market impacted by ongoing economic uncertainty”, however underlying losses surged to £53m.
James Bailey, the boss of Waitrose, said he expected food price inflation to remain steady until Christmas because of tax rises combined with some increases in commodity prices. However, he said it was likely to ease from next year.
Bailey said Waitrose shoppers were “a bit worried about cost increases” but he was “optimistic about Christmas” as the retailer had “good momentum” and was winning new shoppers. He dismissed the suggestion that the chain had benefited from difficulties caused by a cyber-attack at rival Marks & Spencer.
The group said it had invested £191m in revamping stores and other initiatives including bringing back its “never knowingly undersold” price pledge as well as shifting staff hours to busier times in its supermarkets and department stores and bringing in extra workers funded by fashion brands to help improve customer service.
Last week, John Lewis announced plans to host fashion brand Topshop in 32 of its stores from February as the clothing brand’s only national stockist on UK high streets, in a drive to attract younger shoppers and their mothers.
Retailers are battling lacklustre demand, as shoppers rein in spending on non-essentials in the face of high energy bills and steep food price inflation. Changes to employers’ national insurance payments and an increase in the minimum wage introduced in April have underpinned high inflation and dampened hiring by retailers and hospitality businesses.
On Thursday, soft drinks company Fever-Tree said its UK sales were down 6% in the six months to 30 June. It blamed “a challenging backdrop” for bars, cafes and pubs with “higher duty, wages and business rates driving pricing pressure which is disproportionately impacting the spirit and mixer categories.”
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