The John Lewis Partnership has reported a 99% slump in its underlying profits to £1.2m in the first six months of the year, which the company described as “challenging times”.
The significant drop in profits comes despite a 1.6% uptick in revenue to £5.4bn attributed to the increased online grocery sales, up 23% at Waitrose and a 1.2% increase in fashion sales at John Lewis.
Home and technology sales at John Lewis also reported to have sold ahead of the market, with electrical sales up 7.8%. John Lewis Partnership also announced nebt debt was £700m lower when compared with the same period in 2017.
Charlie Mayfield, chairman of the John Lewis Partnership, said the results came during “challenging times in retail” and that the company’s profits before exceptionals were in line with what it set out in its strategy update in June.
He also said the company recognised profits before exceptionals were “always lower and more volatile in the first half than the second half” of the year and profits had been “squeezed in what has been the most promotional market [it had] seen in almost a decade”. He also said the pressure on gross margin has predominantly been from its commitment to maintain price competitiveness.
“This reflects our decision not to pass on to our customers all cost price inflation from a weaker exchange rate and from our ‘Never Knowingly Undersold’ promise, where we have seen an unprecedented level of price matching as other retailers have discounted heavily.
“Gross margin was also affected by a sales mix shift towards electronics rather than big ticket items in home. In addition, John Lewis & Partners profits were impacted by the costs of new shops and higher IT costs as we continued to invest for future growth, and from lower property profits compared to last year.”
Mayfield added: “At Partnership level we have also borne additional costs, particularly as a result of greater investment in cyber security and data protection, which have impacted our overall profits. Despite the reduction in profits, our total net debts have reduced.”