Monday, 19 November, 2018

'Challenging times' blamed as John Lewis profits crash by 99%

Dominic Raab Dominic Raab the Brexit Secretary Credit Matt Dunham AP
Priscilla Morrison | 15 September, 2018, 20:00

In June, it warned that profits would be close to zero this year because it was investing in its IT systems, believing it must maintain investment levels "whatever the economic environment".

He said John Lewis & Partners had been particularly affected by discounting and that full-year profit would be "substantially lower" than last year for the group as a whole.

The John Lewis & Partners department store division took the biggest hit, falling to a £19.3m first-half loss compared with a £54.4m profit a year before as its "never knowingly undersold" price matching policy was stretched by the highest level of discounting by competitors in nearly 10 years.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, said that "these are challenging times in retail", adding that profits before exceptionals were always lower and more volatile in the first half than the second half.

"All I'm just gently saying is that it is rather easy for a business to blame Brexit and the politicians rather than to take responsibility for their own situation". "This year there has been twice as many extravaganza days as there were a year ago and actually the discounts have been even deeper and we're never knowingly undersold at John Lewis, so of course we are matching that, and that affects margins".

'I'm not going to get into some sort of ding-dong with the secretary of state for all things European Union'.

More news: Hurricane Florence Hits Near Wrightsville Beach

Profit at John Lewis's 50 department stores and home shops was squeezed by its pledge to match rivals' prices on a fiercely competitive British high street.

Responding to Mr Raab's criticism, Sir Charlie said: "I didn't actually say that Brexit is to blame for our results". It was largely driven by the company's eponymous department store chain, which sank from a £33.3m profit to a £33.5m operating loss.

Like-for-like sales rose 2.6% at the supermarket, thanks to a marked improvement in the second quarter, with the grocery chain on track for a full-year trading profit.

This offset a better performance at Waitrose, which remained in profit albeit down 12.2% at £96.4 million on an underlying basis.

Sir Charlie confirmed the company would be investing £400 million to £500 million a year despite the problems it faced.

The group has recently launched John Lewis & Partners Womenswear, its largest own brand collection to date and what it calls a "significant step" forward in its plan to build a GBP500m (US$652.4m) own-brand fashion business. "If you're a long-term business like ours which has a relationship with the customer, having a commitment to good value and pricing is a foundational point in that".

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